How to Transform Your KYC Operations


Who is my customer?

This is a fundamental and seemingly simple question that launches a time-consuming, multi-step process to identify and assess potential risk.

Verifying customer information allows you to determine if you can do business with them – in other words, are they a sanctioned entity – and subsequently, should you do business with them? Every institution has a unique risk appetite. Just because you can do business with a customer, doesn’t mean that you should.

Many financial institutions find that gathering the information needed to meet Know Your Customer (KYC) requirements is fraught with hurdles. Disparate systems, business silos and manual processes all hinder the flow of data which feeds the KYC process – from due diligence, screening, risk assessment and quality assurance.

In addition, the increasing number of regulations make meeting KYC compliance obligations more difficult and more expensive than ever. According to 2017 research by Accuity, 76% of respondents said that one of their top challenges was the rising cost of compliance, with nearly one-quarter indicating that reducing time spent on manual tasks is ‘very challenging’.

Easing the compliance burden, automating manual tasks and becoming more efficient can be supported by focusing on three key areas: people, programmes and processes.

People play a pivotal role

While the right technology solution can be seen as the be-all and end-all in operational success, projects rarely succeed on technology alone.

People are your intellectual capital. Their influence can directly impact whether a project flourishes, flounders or fails outright. The most effective KYC operations optimise the combined capabilities of technology and humans.

The focus on ‘people’ starts at the top. The importance of gaining senior-level commitment can’t be emphasised enough when developing a KYC transformation strategy. It will unlock barriers, open communication among the multiple stakeholders and provide the investment support needed to move forward.

Once the transformation project is approved and underway, people continue to be your most valuable asset since they are often the first line of defence in identifying risk.
Invest in training so valued employees can hone skills, keep abreast of changing regulations and continually build their expertise. Participate in industry workshops and conferences to share insights, keep pace with market developments, and learn from other organisations facing common challenges.

Programmes with robust governance

Programmes need structure, goals and defined performance indicators to measure results.

To ensure the success of your KYC transformation programme, establish governance alongside your business as usual framework. Designate an authority within your organisation for key decisions covering operational change and a project working group to manage the day-to-day operational challenges. Finally, roles and responsibilities should be clearly defined by providing escalation channels for major issues.

Governance best practices for long-term transformation success include:

  • Developing a series of principles
  • Standardising and simplifying KYC policies, processes and procedures
  • Implementing automation through technology for sustainability

Data brings processes together

The final key to unlocking KYC transformation success is to address the challenges of existing processes, particularly data quality.

Since data is the foundation for all processes, pay close attention to data hygiene and overall data management. Identify how data is formatted and used, what must be structured versus unstructured, and other attributes that will impact final results. Ensure that data flow is seamless and that data can be tracked from source to destination for full transparency.

As Markus Schulz, Global Head of FCC Controls at Standard Chartered Bank, recently reminded attendees at the Accuity Customer Summit, “There are three priorities in managing financial crime compliance controls: data, data, data. No matter how technology advances, the ‘good-old garbage in, garbage out’ principle still holds true. Organisations that realise this and understand that they are, in essence, a data company offering banking services, will succeed.”

The goal of process improvements is to evolve to a single view of client risk by moving away from business, product and geographic silos. An integrated, holistic view of the client will:

  • Increase productivity
  • Enrich the risk profile
  • Facilitate regulatory compliance
  • Increase client satisfaction

With all other elements in place, the right technology is the final enabler to sustainable efficiency and effectiveness through KYC solutions (e.g. rules engine, case management), artificial intelligence (AI), and application programing interfaces (APIs). Measure success against KPIs and test regularly to rate design and operational effectiveness risk-rate deficiencies, and form action plans to address issues.

Charting the future

There is no silver bullet to solve KYC challenges. While transformation does not happen overnight, having the proper framework in place can help ensure it becomes part of your day-to-day KYC DNA and contributes to ongoing success.

Learn more about Bankers Almanac Risk & Compliance Portfolio and how it can support your financial counterparty Know Your Customer (KYC) requirements.