Current Banking KYC Challenges

Knowing your customer (KYC) is important for banks, especially if they want to retain their customers loyalty and sell them more financial products. But these days KYC has taken on a very different meaning. It’s become a hot topic for the banking industry. KYC is all about compliance in an environment, where regulation has become an overarching theme for banks.

Actually KYC is not new, that most of the banks have already dealing with KYC for quite some times. What’s different is that now there’s this notion of risk. Risk to which the market is exposed due to money laundering fraud and terrorist financing. And that has made that financial crime compliance has now become a key concern for executives at financial institutions.

And it’s basically driven by the fact that regulations have become more diverse and more strict, yet they still leave a lot of ambiguity in terms of implementation. The fines for non-compliance they’re also huge and the remediation costs for improving processes are also very significant.

The fines would definitely played a role and of course what you see in the news is well, in terms of institutions being fined. That is that is not to be ignored. What’s also important is that these days as well, with more regulations coming into play and with profit margins also being under pressure, banks are now also starting to look more carefully after their businesses.

They can start saving some costs as well. And typically within financial institutions those are areas where there is no competitive advantage. And what we’ve seen as well is, that the feedback that we hear from our community was as well there is actually no competitive advantage in doing KYC.

More on the opposite side, there is more to win if banks start to do KYC and address it commonly. There’s a couple of challenges KYC registry. First is a clear lack of standardization. So the the regulatory requirements they’ve become more diverse and more strict. So it makes it really difficult for banks to simply comply. And kyc is not something like you would have sanctions compliance where you can basically have a number of transactions that you would screen against a list of entities.

It’s much more complex and it’s also impacting the time that is required to onboard new correspondent banking relationships which is of course not a good news.

Secondly, there is the need for additional transparency. That links to the fact that banks are requesting their correspondent banks to also provide much more sensitive information. For instance you would have ultimate beneficial ownership information, which is linked to key controllers of the financial institutions for the purpose of PAP screening which is politically exposed people. So the checks that you will do around that.

The ultimate the responsibility and liability remains with financial institutions. With best KYC method, like face recognition technology for instance, enable banks to provide the value add services. Also enabling banks to deal with financial crime compliance issues in a more effective and efficient way.