Don’t sleepwalk into a KYC arms race - Part 5: Tick box exercise

17 January 2018

Welcome to our penultimate blog on why the time has come to opt out of the Know Your Customer (KYC) arms race.

What does KYC actually mean? The clue is in the name: Know Your Customer. If you know your customer, you understand the risks they pose and can manage them appropriately.

On a number of occasions, reviewed KYC files are just a list of random documents in a folder with very little narrative or explanation. More often than not, the KYC process has become a regulator’s worst nightmare… A tick box exercise!

We believe this is because there are too many requirements that have evolved over time because of the KYC arms race. If one bank does something, then others copy it to not fall out of line with standard procedures. It is strength in numbers.

In our experience, a lot of the KYC requirements in place at banks aren’t actually required to manage the financial crime risk, they are just collected and stored because that’s the way it has always been done.

When you look at how the new challenger banks perform KYC they only collect what is necessary and useful to allow them to properly understand and take time to assess the risks posed by their customer. This way they can manage these risks and ultimately prevent financial crime from taking place.

They see it as an opportunity to develop their relationship with their customers, to get to know them better and gain an understanding of their requirements.

Our position has allowed us access to a large number of banks policies and procedures. We are able to benchmark how banks compare to each other and understand what works, what doesn’t, but more importantly, what is necessary to make KYC better, faster and cheaper.

Next week, our final blog will look at what should be the centre to all of this… the Customer.

Missed the previous blogs about KYC? Catch-up on the series below:

Don’t sleepwalk into a KYC arms race

Don’t sleepwalk into a KYC arms race - Part 2: Time is money

Don’t sleepwalk into a KYC arms race - Part 3: Risk based approach

Don't sleepwalk into a KYC arms race - Part 4: Keep it simple

Imran Farooqi | Partner
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