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Treasury Management

KYC Getting Easier with Better Tech

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June 14, 2018

Know your customer bank mandates prompt technology-enabled solutions

E-commerceThink of “know your customer” (KYC) processes as necessary hygiene to keep your customer onboarding clean. KYC requirements have become more onerous as regulations governing anti-money laundering, sanctions violations and tax evasion have forced banks to ask for customer information incessantly. What’s worse is that different banks and jurisdictions have differing standards. Technology solutions—starting with forms that populate with publicly-available information—are something everyone would appreciate. At a recent Asia Treasurers’ Peer Group (AsiaTPG) meeting in Singapore, members heard from four providers with varying approaches to the problem, including Bloomberg, IBM, IHS Markit and Thomson Reuters.

One takeaway from the meeting was that three core principles identified by IHS Markit were to “standardize, centralize, digitize.” The company offers clients a Counterparty Manager, which it says allows them to engage with counterparties, exchange and track entities as well as provide onboarding information securely, and finally, address regulatory compliance requirements. It mainly serves as a repository, with a validation service added to it. Corporates that are just contributors of content do not pay; banks or users of the information pay fees for the validation service.

IHS Markit also offers more robust verification and validation tools through its KYC Services solution. IHS Markit’s approach focuses on three outcomes: setting common standards on documentary requirements (standardizing); putting all content in a common place (centralizing); and using trusted technology to share information (digitizing) in a controlled manner.

Thomson Reuters takes a “country level utility” approach to streamlining KYC compliance. Following its success in South Africa launching a country utility for KYC, Thomson Reuters is working within a consortium to build similar utility services in Singapore and Hong Kong. It is working with many banks to set the baseline for KYC documentation requirements. The goal: establish a central repository that stores data required to support a financial institution’s KYC procedures. Corporates will contribute their data and documents, and specify which banks can access the information (called “permissioned access”).

Meanwhile IBM is looking to harness the latest tech trend to handle KYC: blockchain. IBM feels this technology presents opportunity for “collective KYC.” Banks usually have different requirements and due diligence standards for KYC, which reflects varying risk appetites. But in a “sharing economy” approach, blockchain technology may offer a transparent and trusted environment to create collective standards. IBM is running a test of this concept in Singapore with banks including Deutsche Bank, MUFG, ANZ, and SMBC; the pilot project will last four to six months. IBM is encouraging as many corporates as possible to participate and provide input to refine this blockchain solution.

Finally, Bloomberg showed off its technology to ease workflows in KYC compliance. Bloomberg Exchange provides a secure way to exchange documents with any counterparty. The product leverages software that recognizes text in documents and pre-populates fields from its databases, starting with publicly available information; it pre-fills any templated form based on designated corresponding fields. This product platform also lets users create workflows relevant for corporates such as approval process flows for creating and amending records.

KYC is one of the biggest pain points in the financial industry—it is mandatory for all customer onboarding and is expensive, onerous and duplicative while being imperfect in detecting tax evasion or money laundering. There is no question technology can streamline KYC processes, enhancing customer identification and verification, collecting and validating document authenticity, and screening against sanctions and other blacklists. All members agreed that they look forward to the day when technology improves KYC checks and the quality of risk management, while reducing costs and time across the financial industry. It will come sooner if more banks and jurisdictions can agree to standards and streamline extraneous data requests.

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