Compliance
Conducting KYC Tasks Isn't Getting Easier – Study
For years, technology firms have argued that their solutions can ease the pain of KYC checks on clients amidst the ever-shifting world of compliance. And yet, it seems as though the time taken to get work done isn't getting shorter – it's taking longer.
Carrying out know your customer (KYC) tasks is becoming
increasingly costly and time consuming for banks worldwide, a
report says as compliance demands continue amidst geopolitical
crises.
The findings, from Fenergo, the European KYC and
client lifecycle management software solutions firm, are likely
to increase the focus on technology to help reconcile the need
for rigorous tests with business efficiency and client service.
This clash of efficiency versus compliance remains a major
bugbear for the wealth and private banking sector. Sanctions
against Russia and other geopolitical hot topics add to the
mix.
Fenergo’s study found that it cost on average
$2,598 to complete a KYC review for a corporate banking client in
2023, increasing by 17 per cent from 2022. Rising costs are
a significant concern in the UK market, with banks incurring an
average cost of $2,613 to complete a KYC review for a corporate
client, up 19 per cent year-on-year.
Besides being increasingly costly, KYC checks are also
taking banks much longer to complete. Globally, banks took on
average 95 days to complete a KYC review in 2023, rising from 84
days in 2022. This trend is particularly stark in the UK, where
firms have taken on average 17 more days to complete a KYC
review this year than in 2022.
Adding to strains is a worsening talent shortage, with the global
average number of people involved in KYC tasks having fallen by
14 per cent in the last year. In the UK, staff numbers have
increased marginally (1 per cent).
Turnoff
Slow onboarding processes, which are a turnoff for clients,
are costing businesses lost revenues, the study found.
Nearly half (48 per cent) of banks globally said they have lost
clients due to slow or inefficient onboarding processes, a figure
that falls slightly to 39 per cent for banks operating in the UK.
This may explain why UK firms are prioritizing financial crime
risk in terms of their technology investment over the coming
year, with 40 per cent of respondents wanting to bolster this
area of risk.
The findings come amid a renewed push by the Financial
Conduct Authority (FCA) to crack down on money
laundering in the UK. Between January and October 2023, the FCA
fined financial institutions in the UK a combined $410 million
for anti-money laundering (AML) compliance failures.
The regulator is now also targeting cryptocurrency businesses
conducting international transfers through its new ‘Travel
Rule’ which came into effect on 1 September.
“Financial institutions across the globe have yet to make
meaningful progress on streamlining KYC and anti-money laundering
processes,” Stella Clarke, chief strategy officer, Fenergo, said.
“Most banks, not least those operating in the UK, still rely
heavily on manual processes when it comes to KYC, contributing to
lofty onboarding costs, and a greater risk of human error and
regulatory breaches. This approach will no longer be fit for
purpose over the coming months as financial regulators look to
clamp down hard on money laundering.”
The challenge of keeping abreast of data without losing efficiency has spawned a whole sector of tech-driven firms which can provide information on onboarding, KYC tasks, and more, such as smartKYC, Appway (now owned by FNZ) and ComplyAdvantage, among others.