Know Your Customer: What Banks and Corporates Need to Know

A key challenge is efficiency according to Alan Paris, leader of the global financial services team at eClerx, which manages and improves complex data-driven processes. As he told gtnews, many corporates and banks are running KYC projects on spreadsheets or Access databases and they either lack a uniform filing system of the evidence or it is not linked up. The challenge is compounded in Asia by each jurisdiction having its own requirements, the need to ensure accuracy of documents and then checking whether they are complete.

What these companies need then is a uniform workflow, where evidence is stored and made available centrally. The workflow for the entire process should be structured, so that companies know exactly where they are in terms of onboarding, credit checks, KYC and renewal. They should also have a system to escalate and flag risk, while regulatory and compliance staff must be able to track the process across the entire spectrum. At some stage along the way, the company needs to create an audit trail, so that it has auditability of and controls over the information.

While many companies still do use relatively manual processes, new software solutions are enabling leading corporates and banks to improve compliance, increase efficiency and enhance their ability to meet regulatory requirements.

Software can be used to define the workflow; for example, with business rules attached to determine which checks need to be done by which departments. Software can also enable automated evidence-gathering using public data, as well as tools such as web crawlers and automated negative news search. Software can also automate reviews for US Foreign Account Tax Compliance Act (FATCA) compliance and for market-specific rules for individual countries.

Paris said that US multinational energy corporation Chevron, for example, has more than 200 subsidiaries, and each one of them has to be KYC-compliant for its banking relationships, commercial investments and even staff who have accounts at the various banks. For a company this large, the key has been to leverage software to enhance efficiency for KYC compliance for multiple operating areas.

Keys to Success

At global banks as well as local banks, suggests Paris, the KYC tool can help firms get their houses in order so they are able to submit data on a regular basis. Functional departments may use software to track relationships for client onboarding, compliance, credit, risk and other functions as well as to determine where the bank stands in terms of being KYC-compliant through the entire process, from new clients and renewals to suspension and account closure.

Software can also include automatic risk classification that assesses clients as high-, medium- or low-risk. Automatically defining risk and required documentation can enable companies to reduce their staffing needs as the need for human intervention is reduced, which is a tremendous benefit in markets where experienced staff are hard to find.

As leading banks start to organise around KYC, they are also building client onboarding systems and unifying systems across the bank, reports Paris. They have also pushed KYC into the region so that they can leverage regional subject matter expertise.

On a local level, there is a uniqueness to Asian regulatory regimes that results in more detailed analysis than might be needed only in a centralised model. Add to this a continuing stream of new rules, fresh interpretations of KYC and other regulatory requirements. Other keys to success, says Paris, come from knowing the data sources in the countries, pulling in information from other countries and staying current amidst constantly shifting markets.

While KYC will likely to be an increasingly important regulatory obligation and increases in requirements seem likely, leveraging automation enables enhanced practices that can make the process better, faster and more effective.