Know Your Customer and KYC as a Service is gaining traction in the highly regulated world of banking. What are the benefits for institutions, customers and regulators?
Knowing who you are doing business with is an important component of trust. At the same time, providing your information is an important step in order to gain that trust.
However, in a world where trust is earned, it is surprising to see just how challenging it is to collect quality and accurate client reference data for financial institutions.
In addition to collecting and verifying this data, the nature in which it presents itself is often unstructured and spread across geographies, making it even more labor intensive to refine.
In 2014, the South African Reserve Bank fined the country’s four largest banks a collective 125 million Rand (US$11.8 million) for failing to implement adequate anti-money laundering controls and 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 need for standardization of Know Your Customer (KYC) policies and procedures for the banking community is becoming increasingly important for banks and their customers.
The emergence of regional specific KYC as a Service models is not something that could have been predicted a few years ago, but as fines become bigger and regulations become tighter, innovation in KYC and client onboarding needs to stay ahead of the game.
Earlier this year, we partnered with three South African banks (Barclays Africa, Rand Merchant Bank and Standard Bank of South Africa) to co-champion the formation of the South Africa KYC Managed Service that is powered by us.
It meets a standard set of requirements through a central process that enables banks and their customers to execute their responsibilities in a more efficient, compliant and cost effective manner.
KYC as a Service offers a central, secure portal where corporates and buy-side firms can share their information with their banks, putting themselves in control of their own information, providing their documentation only once and without suffering duplicative requests for information.
During the recent 2016 Annual Risk Africa Summit, a panel discussion on ‘Innovation in KYC’ highlighted the need for collaboration from banks to participate in this movement, allowing for greater transparency and better ability to detect financial crime.
With the banks’ customers becoming increasingly frustrated, alignment in terms of interpreting regulation is essential.
From a bank’s perspective, what has been the collaborative interest?
- From a cost perspective, KYC as a Service makes sense thanks to mutualization of cost across multiple banks.
- It becomes convenient for the customer to put their documents 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.
“Everyone must participate! It’s a win-win-win. A win for the banks, a win for the customers and a win for the regulators!” said Neil Pryce, Client Chief Operating Officer, Barclays Africa, at the recent Africa Risk Summit.
South Africa has set a precedent and banks and regulators around the world have taken notice.
Other countries are beginning to follow suit with selection processes being run in North America, Europe and Asia.
Globally, KYC as a Service is gaining traction as a result of the outlined challenges.
We hope the next step will be customers championing the benefits of adopting the service to their bankers, peers, customers and suppliers, in pursuit of industry scale so that the benefits may be maximized for all participants and stakeholders.