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The battle for efficient KYC:
Addressing the key challenges for 2022

Beyond is committed to broadening the industry debate on key operational topics in financial services and we were delighted to co-host a breakfast roundtable recently with EFI (Efficient Frontiers International) on the topic ‘The battle for efficient KYC: addressing the key challenges for 2022’, welcoming senior leaders from a number of top tier Financial Institutions.

Perpetual or ‘continuous’ KYC formed a significant part of the discussion given the strategic emphasis for many large Financial Institutions to increase efficiency and reduce the cost of compliance. The conversations around the table also reinforced the considerations covered in our recent whitepaper: “Continual compliance: A guide to delivering Perpetual KYC”, which highlighted the key benefits to be gained, challenges that must be overcome and suggested a 3-stage approach to tackle the transformational journey to Perpetual KYC. These steps are outlined below and can support any organisation considering embarking on this transformation journey:

Stage One
Building the KYC baseline

Perpetual KYC essentially comes down to being able to measure data change – for it to operate successfully you need to have a baseline version of client data to start the process. This involves a number of steps:

Data harmonisation

Client data must be collected from all records held within an organisation across data silos which may involve product, jurisdiction, geography and business line. Once gathered, any overlapping, contradictory data must be resolved to provide a single source of the truth

Data remediation

The data to be placed into the baseline must be accurate at the point of file creation, therefore the baseline data will require analysis, review and sign-off

Creation of a single client view

Once the data is cleansed, this should be placed in a single client record which can be accessed by all relevant downstream systems, supporting the ability to start and keep all client records digital throughout the lifecycle

Stage Two
Developing monitoring capabilities

Once the baseline is live in systems, external and internal data sources must be monitored for changes to individual client data attributes and changing information on the client’s behaviour. This will require:

Monitoring capability

The integration of data sources which continually scan for change in client data attributes and behaviour across both internal and external data sources. This may involve company registries, new sources, screening lists and transactional monitoring systems

Refined policies

Transitioning to a Perpetual KYC approach will require policies which clearly articulate which data changes or threshold levels constitute a material change triggering cross-checks, manual touch and potentially full client refresh. Non-material changes may be addressed by straight through processing (STP) to the client record

Data automation

Monitoring may identify a considerable number of non-material changes across the client population. Data automation solutions such as optical character recognition (OCR), robotic process automation (RPA) and artificial intelligence (AI) and machine learning (ML) solutions may be needed to prevent manual intervention

Rules engines

Policy will need to be digitised and encoded to drive rule engines which implement regulation and policy within appropriate systems. A digital approach to policy also enables the management and impact of policy change over time

Stage Three
Observe and react to reality

The true power of Perpetual KYC becomes evident once monitoring systems are combined with transactional information. The ability to compare the baseline expectations of a client to transaction monitoring data and therefore observe how the client behaves in reality, provides the intelligence to determine when a client is operating outside expected parameters.

Unexpected behaviour almost certainly indicates that there is a reason to review the client, either to determine if their behaviour presents a potential risk scoring change, a need for some form of intervention, or more positively, it may indicate a need for additional support and services, representing a revenue opportunity.

Future roundtables
Addressing key challenges

Beyond and EFI are working together to promote an open and transparent dialogue between senior leaders across the industry on the key topics impacting client onboarding, operations & compliance..

We will be co-hosting further sessions focussed on critical industry challenges over the coming months. These discussions are designed for senior individuals working in Corporate and Investment Banking, Asset Management, and other large financial institutions.  These sessions will be kept small to promote open and practical discussion along with the opportunity to network with industry colleagues. If you are interested in attending one of our future roundtables, please contact us at info@beyondfs.co.uk.

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