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Know Your Customer

Are Africa’s banks on top of KYC challenge?

Sneha Shah

03 Mar 2017

A BANK TELLER LOOKS AT A ONE RAND COIN.
Photographer: Juda Ngwenya

Many African economies are booming, but the perception of heightened risk means the continent’s banks are under pressure to show they are aligning with global standards, including Know Your Customer (KYC).

Africa has the youngest population in the world, with 200 million 15 to 24 year-olds. Better educated and seeking greater economic opportunities than previous generations, they benefit from extensive digital and mobile phone penetration.

Heavy investment in telecoms infrastructure and this greater mobile use has boosted financial inclusion, leading to significant opportunities for the banking sector.

Despite this, the perception of risk in Africa is a significant hurdle for the banking community and one underpinned by recent regulatory action.

Poor governance

In just one example, the South African Reserve Bank fined the country’s four largest banks R125 million (US$11.8 million) in 2014 over lax anti-money laundering controls.

Challenges such as a lack of adequate transparency and sub-par governance are often prevalent in such dynamic, high growth markets.

Download report — Real world KYC challenges: a focus on South Africa

Thomson Reuters is committed to partnering with governments, banks and corporates to help banks find solutions to these issues.

KYC challenges

Financial institutions and their clients need to safeguard themselves at all times and therefore the importance of conducting thorough KYC due diligence cannot be underestimated.

If an African bank does not know its customers, it cannot assert that those customers are not sanctioned entities, and therefore a significant risk arises.

In correspondent banking, the risks can be transferred or more likely blocked, as major U.S. and EU banks will not conduct business with an African bank that does not know its own customers.

The risks associated with not knowing exactly who you are doing business with are both significant and well documented, but compliance can be expensive and time consuming.

The answer? Existing KYC processes need to be streamlined and standardized.

An forex dealer offers bond notes and South African Rand outside a bank in the central business district in Harare
Photographer: Philimon Bulawayo

Find out more how you can accelerate your ability to excel in KYC due diligence

Central portal

In 2016, three of South Africa’s largest banks partnered with Thomson Reuters to launch the KYC Managed Service in Africa.

The first of its kind, the service provides a secure, central portal where corporates and buy-side firms can share their information with their chosen financial institutions.

This gives them a high degree of control over their confidential data and removes the costly and time-consuming need to supply the same information to each financial institution separately.

Download report — Real world KYC challenges: a focus on South Africa

The model could well be the blueprint for the future, with local, centralized KYC information management, enhanced security and decreased reliance on client documents.

Best in class

For those organizations that are serious about managing their KYC processes effectively — both in Africa and beyond — the upcoming acquisition of Clarient, a global KYC managed services organization will cement Thomson Reuters position as the best in class provider.

Thomson Reuters brought the first KYC managed service to market three years ago, and today KYC as a Service serves 23 leading financial institutions worldwide with over 200,000 KYC records published to date.

Find out more about Thomson Reuters World-Check Risk Intelligence

We consistently onboard or refresh over 2,000 clients per month and help customers accelerate client onboarding, comply with regulation, reduce costs and improve client experience.

By using efficient and robust KYC processes that can be harnessed as an effective tool to address regulatory and compliance issues, it is possible to drive sustainable growth and develop the many opportunities unfolding across banking in Africa.

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