Global regulation continues to increase KYC complexity
21 September 2018 London
Image: Shutterstock
As global regulation continues to increase know-your-customer (KYC) complexity, banks turn to technology innovation, according to a survey.
Some 75 percent of senior compliance and correspondent banking professionals have encountered added complexity in interpreting and adhering to local legislation, the survey revealed.
The annual Accuity Financial Counterparty KYC survey found that global regulators have continued to introduce and enforce more stringent compliance standards in efforts to mitigate the risk of financial crime.
As a result, compliance officers are under pressure to have all relevant due diligence information at their fingertips.
Additionally, 76 percent of respondents continue to find rising costs and onerous processes a challenge in KYC, the survey revealed.
Meanwhile, the highest priority for 67 percent of respondents is avoiding regulatory fines and enforcement action, yet 81 percent are struggling to adapt to changing global regulation, which has gathered pace in recent years.
According to the survey, 77 percent reported that to complete KYC checks, they must undertake manual and repetitive tasks.
The recruitment and training of specialist staff also emerged as an issue frustrating the KYC process, with 68 percent of respondents flagging skills shortage as a challenge, the survey found.
Dalbir Sahota, KYC industry specialist at Accuity, said: “The rising cost of compliance and changing regulatory requirements are driving financial institutions to constantly evolve their systems, but their operations are not designed for continuous change.”
“The laborious processes involved in KYC continue to present hurdles, which can only be overcome with a more comprehensive systems overhaul.”
Sahota added: “There are significant efficiency gains yet to be made in this industry, and technology innovation will be key.”
“We expect to see financial institutions automate more of their KYC processes as well as looking to new developments in artificial intelligence and machine learning to overcome some of these efficiency challenges—so there is cause for optimism.”
“An additional cause for optimism is a slowdown in the de-risking trend we have seen develop over the last few years.”
He concluded: “This latest survey suggests that although de-risking continues, the pace may be slowing. In 2014, 58 percent of respondents had over 250 financial counterparties; this reduced to 47 percent in 2016 and 43 percent in 2017. Over the same period, the number of financial institutions with fewer than 250 counterparties has increased.”
Some 75 percent of senior compliance and correspondent banking professionals have encountered added complexity in interpreting and adhering to local legislation, the survey revealed.
The annual Accuity Financial Counterparty KYC survey found that global regulators have continued to introduce and enforce more stringent compliance standards in efforts to mitigate the risk of financial crime.
As a result, compliance officers are under pressure to have all relevant due diligence information at their fingertips.
Additionally, 76 percent of respondents continue to find rising costs and onerous processes a challenge in KYC, the survey revealed.
Meanwhile, the highest priority for 67 percent of respondents is avoiding regulatory fines and enforcement action, yet 81 percent are struggling to adapt to changing global regulation, which has gathered pace in recent years.
According to the survey, 77 percent reported that to complete KYC checks, they must undertake manual and repetitive tasks.
The recruitment and training of specialist staff also emerged as an issue frustrating the KYC process, with 68 percent of respondents flagging skills shortage as a challenge, the survey found.
Dalbir Sahota, KYC industry specialist at Accuity, said: “The rising cost of compliance and changing regulatory requirements are driving financial institutions to constantly evolve their systems, but their operations are not designed for continuous change.”
“The laborious processes involved in KYC continue to present hurdles, which can only be overcome with a more comprehensive systems overhaul.”
Sahota added: “There are significant efficiency gains yet to be made in this industry, and technology innovation will be key.”
“We expect to see financial institutions automate more of their KYC processes as well as looking to new developments in artificial intelligence and machine learning to overcome some of these efficiency challenges—so there is cause for optimism.”
“An additional cause for optimism is a slowdown in the de-risking trend we have seen develop over the last few years.”
He concluded: “This latest survey suggests that although de-risking continues, the pace may be slowing. In 2014, 58 percent of respondents had over 250 financial counterparties; this reduced to 47 percent in 2016 and 43 percent in 2017. Over the same period, the number of financial institutions with fewer than 250 counterparties has increased.”
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