In 2014 the South African Reserve Bank fined the country’s four largest banks a collective ZAR 125 million for failing to implement adequate anti-money laundering controls and risk measures.
Stemming from these findings, the Reserve Bank imposed administrative sanctions and ordered these banks to take remedial action to address the issues identified.
The sanctions related to a failure to comply with the Financial Intelligence Centre Act (FICA), which aims to combat money laundering and the financing of terrorism by legislating the necessary controls that banks should have in place.
“The danger of not fulfilling compliance measures can open the door to criminals abusing our institutions for criminal activities.”
– Dr. Murray Michell, Director, Financial Intelligence Centre
The need for standardization of Know Your Customer (KYC) policies and procedures for the banking community is becoming increasingly important for banks and their customers, and the South African banking community is taking action.
July 2016 marked the launch of Thomson Reuters Org ID KYC managed service in Africa in which three South African banks (Barclays Africa, Rand Merchant Bank and Standard Bank of South Africa) partnered with Thomson Reuters to design and launch the South African KYC managed service.
The partnership defines a standard set of requirements supported by a standard process that enables banks and their customers to execute their responsibilities in a more efficient, compliant and cost effective manner.
From a bank’s perspective, what is the collaborative interest?
- A KYC managed service makes sense, thanks to mutualization of cost across multiple banks.
- It becomes convenient for the customer to put their documentation in one central place.
- It puts the customer in control of their own information, without suffering duplicative information requests.
- It reduces the burden on the sell-side brokers.
- Banks can stay focused on their core business of serving their customers.
Sorting out the chaos
Samuel van Niekerk, head of operations CIB, Standard Bank explained: “I really think this initiative will sort out the chaos that exists within the KYC process from the collection of the documentation, the maintenance of the documentations and the storage of the documentation within their different entities.”
“The fact that you can have a centralized database for KYC is a big deal,” adds Christine Ondimu, compliance, HSBC. “The variety of documents from different customers, different countries, and different languages creates a fiasco, a misrepresentation of documents.”
South Africa is leading the way for other jurisdictions to follow with an approach that puts the customer at the center of all decision making.
Financial Institutions can spend up to 180 days to onboard a new client, but if the KYC record already exists in a managed portal, the time to onboard is going to reduce by 90% or more.
“The clients will no longer have to run to different banks or financial institutions to provide the information,” said van Niekerk. “All of this will be centrally available. This will enhance the client experience overall.”
The service is expected to quickly extend to other domestic and international banks operating in South Africa before moving to other segments and countries in Africa and in turn, globally.
But the impact doesn’t end there. An additional exciting aspect to this partnership is that it solves a problem not just for South African corporates but for African corporations. It has the potential to impact Africa’s success and underpin the entire growth story.
What our partners had to say
View the 2016 Annual Report: The Partnership Equation to see highlights from our strategic partnerships over the last year.
South Africa and KYC challenges
Our independent survey shows:
Download the full report for more insights on the KYC challenges facing South African financial institutions and corporates.
Join the conversation
How will quick, accessible KYC processes promote growth in Africa? Let us know what you think in the comments below.