KYC compliance ‘an obstacle to winning new clients’


Financial institutions worldwide not only prioritise financial inclusion and financial transparency, but also share the desire to increase data sharing and collaboration with their peers to achieve it, reports LexisNexis Risk Solutions.

The big data, technology and analytic linking company has published the global Financial Inclusion and Transparency Survey, which targeted 300 senior-level professionals in the financial services sector with anti-money laundering (AML) compliance responsibilities and revealed worldwide consensus around the benefits of a global utility.

Nearly every respondent agreed that a global customer due diligence utility would help protect an institution’s reputation, reduce compliance cost, support greater efficiency and provide better data to transform the way companies make decisions.

Seventy-nine per cent of respondents agreed they would be willing to collaborate with their peers to streamline onboarding know-your-customer (KYC) and watch-list processing, while 78% stated that they would be willing to share data to see such improvements. The same proportion felt that the benefits would outweigh the costs if they could be part of a shared service to efficiently obtain, manage and utilise due diligence collected from common customers.

“These findings highlight the fact that banks across the world not only share the challenge of managing the increasing compliance cost, but also risk losing consumer and business deals as a result of new customer onboarding deficiencies,” the survey authors noted.

Despite the survey finding that 77% of financial institutions consider providing financial services to the unbanked and under-banked very important, roughly half turn away between 6% and 15% of potential individual customers (50%) and small business customers (48%) due to their current KYC or credit risk management processes. More than 40% of respondents cited the cost of collecting information as a top concern.

Although every financial centre surveyed agreed that their onboarding processes are important for both compliance and better understanding their customers, the UK is the only country where respondents saw onboarding as yielding true insights more so than as just a compliance activity.

“The results showed that financial institutions across the globe share the view that financial transparency makes it more difficult to hide illicit transactions (83%), and is a priority for company boards of directors (85%),” commented LexisNexis Risk Solutions. “The study also found that providing internal stakeholders with the information they need to make compliance risk and credit decisions about consumers quickly is seen as a critical role of compliance functions (87%).

Dean Curtis, the company’s UK managing director, commented: “The fight to combat money laundering, terrorist financing and tax evasion continues to intensify and be as important to society.

“The [UK] government’s recent review and action plan aims to increase both the effectiveness and efficiency of financial crime prevention. As such, more is expected of the financial services industry to protect society and prevent the issues in question. As our survey highlights, it is clear that improving the KYC process will significantly help facilitate this outcome.”

“Fundamentally, there is a growing need for greater collaboration and information sharing between financial institutions, government and law enforcement agencies around the world. Utilising and sharing the vast, disparate data which is available and using this effectively with targeted analytics is imperative to both the effective detection and prevention. This also ensures resources are prioritised and deployed to provide the most impact.

“This approach promotes better outcomes, financial inclusion and the management of appropriate risk rather than avoidance where risk can be driven into shadow banking or other areas of the economy.”


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Charles Michel