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KYC: Are Shared Utilities the Answer?

Editorial Team
KYC Know Your Customer Thomson Reuters blog
Photographer: Toby Melville

After the global financial crisis comes a paperchase crisis as banks ask clients to complete KYC processes time and again. But is there a better solution?

After the global financial crisis, banks and financial institutions are grappling with the ever-increasing compliance demands of regulators. Costs, time, effort and the complexity involved in remaining compliant are, quite literally, spiraling out of control.

This in turn has implications for day-to-day business activity. Bank/client relationships are becoming strained as constant requests by banks for identity documentation slow the pace of business and lead to frustration, lost working hours and reduced revenue. Current processes are complex and often redundant, requiring every customer to provide separate information to every financial institution they deal with. There is no consistent standard and significant resources are being deployed in non-revenue generating activities. Spurred on by the threat of hefty fines and potential reputational damage if they fail in their Know Your Customer (KYC) due diligence, many banks err on the side of caution, requesting more documentation than absolutely necessary and further exacerbating the problem. It’s a vicious circle and, frankly, a reality check that no bank can afford to ignore.

The future could be brighter

Regulations such as FATCA, EMIR, rMiFID and Dodd Frank are behind the surge in compliance demands faced by banks, but these types of regulations are only going to become more onerous as regulators seek to keep a step ahead of sophisticated criminals.

For example, in the US the Financial Crimes Enforcement Network (FinCEN)’s proposed rules document indicates a move towards more stringent customer due diligence requirements and in Europe, the upcoming 4th Anti Money Laundering (AML) directive will require more corporate identity-related documentation to be collected, collated, verified, securely stored, maintained, and then made available when necessary. The new rules will apply to all legal entities (including companies) within the EU.

Against this backdrop, it is unsurprising that several solutions – including utility options – have emerged since mid-2013 in a bid to ease the burden on both banks and their end-clients. Many of these utility solutions are joint efforts between banks and third parties.

The Shared Utility model

In a nutshell, here’s how the Shared Utility model works. Rather than each financial institution managing its own client document collection – which is time-consuming and costly – they all participate in a utility service provided by a third party, paying only for the services and data they use. Pertinent end-client information is uploaded onto a single portal that is then shared only with authorized and approved banks. This means that all the necessary identity information for client on-boarding is available to banks in one central, secure location.

While there are differences and nuances among providers in this space, all offer the essential core service that allows end-clients to upload the required documents to one central, secure portal that authorized financial institutions can then access. Some providers offer additional services to further streamline the process, lower costs and reduce the administrative burden of KYC due diligence.


Regulators are clear in their expectations: KYC remains the responsibility of banks and in light of current and proposed regulations, the time is right for banks to seriously consider optimizing their KYC processes.

The Shared Utility model delivers several benefits. Firstly, it reduces the cost to banks of maintaining a full in-house team to manage the entire KYC function. This reduces pressure on often over-extended infrastructures. These solutions also offer flexibility as banks’ needs and requirements change and can scale to an organization as it grows and enters new global markets. Most outsourcing models also eliminate parts of the on-boarding process for new clients – creating a much more positive and streamlined customer experience.

But perhaps most importantly, an optimized KYC function frees up time for staff members to focus on heightened areas of risk and perform enhanced due-diligence. Intellectual capital and resources can once again be deployed in business-critical core functions.

Learn more about the solutions available for your business. Discover KYC as a Service.

KYC as a Service offers end-to-end client identity, verification, screening and monitoring