Tackling the complexity of KYC

This article was written by Lisa Roitman, regulatory compliance workflow specialist and business strategist in Bloomberg’s Enterprise Data department.

Evolving regulation and geopolitical conditions have changed operational dynamics and dramatically increased Know Your Customer (KYC) burdens on market players. Financial Services firms face increased pressure to conduct ongoing KYC, draining treasury operations resources.

It’s estimated that treasury teams at multi-national corporations spend upwards of 25-hours-a-week tackling KYC requests, often on repetitive and administrative tasks, according to a NeuGroup study.

Increasingly, corporate treasurers highlight KYC as one of their most significant pain points, frustrated by the consumption of time, human capital and money spent, instead of focusing efforts on value-adding activities. Corporations (in particular multi-national corporations) are far more likely to maintain multiple banking relationships, making the management of KYC documentation and data more time consuming and complicated. Even maintaining simple bank by bank portal access and password information can drain resources.

Dan Matthies, Head of KYC at Bloomberg says: “The industry needs to shift from emails to automation. In the future, corporate treasurers should only need to grant access to specific data stored in a secure place, switching from documents to data.”

This allows multiple, static requests to become continuous flows. Machines can automatically distribute information to authorized parties depending on the set rules. Updates can be made in real time everywhere and corporate treasurers will have total control over their data.

“Our experience shows that asset managers, for example, are willing to simplify their KYC experience,” Matthies adds. They also insist on remaining in control which is critical in the context of regulations like GDPR.

While some market participants suggest that the solution may lie in the creation of a central KYC register, standardization may prove impossible. There are many obstacles to regulators, countries and banks agreeing on standard processes. Some may even view world standardization as anti-competitive. Absent the creation by regulators of a central KYC register, corporate treasurers are increasingly looking to technology driven solutions to help solve an industry wide problem.

KYC solutions take a variety of approaches to address differing user needs but the main differentiators revolve around automation, data quality, ease of use, security and auditability.

Imperatives for a successful KYC solution

• Automation – Relying on an army of people to request and respond to KYC and regulatory driven document requests is inefficient and unsustainable. When the industry shifts from email to automation, look for solutions moving to create permissioned automatic distribution of documents and data. Focus on granting access to structured data and documents rather than dumping unstructured data and documents into a common basket.
• Data quality – Nearly three-quarters of buyside and sellside firms agree that data management tools are key to the development of a scalable, holistic approach to KYC. They also acknowledge that effective tools to help build automation into KYC workflows starts with high-quality data sources. With the right system corporates may actually create value out of their own data. Facilitating the extraction of critical information by their banking counterparties can drive opportunity. Therefore, look for a solution that is able to collect unstructured data from primary source documents and standardize that data.
• Security – As operations become more automated, exposure to cyber risk increases. Maintaining control over sensitive data and documents is paramount. Look for solutions which have clearly defined permissions, access and control features, and encryption at rest and in transit along with robust audit trails of any activity.
• Ease of use – Ultimately, the success of any technology driven solution lies in its ease of implementation, adoption and use. While individuals in an organization may select individual solutions for their different functions, when it comes to KYC data and documents look for solutions which provide a shared platform with access and workflow functionality that provides multi-department access. Employees involved in KYC tasks often span corporate treasury, legal, tax and corporate secretary’s office and therefore a technology which focuses on workflow and transparency can help streamline tasks.
• Auditability – Look for systems that provide a full audit trail of activity including both data points and documents provided.

Corporate treasurers play an increasingly critical role as advisors to their organizations but their value creation agendas are often sidelined by the demands of KYC. As opening new bank accounts and maintaining trading relationships consumes more and more time, costs rise and new business can stagnate. While there may be no single path to solving the conundrum, adopting a solution focused on automation, security and data quality can streamline operations and help corporate treasurers reshape the KYC landscape.

This article is reproduced from the Bloomberg’s Professional Services blog, and is licensed by The Association of Corporate Treasurers.