Insight & Analysis

Know your customer – no longer a headache?

Published: Oct 2019

It goes without saying that know your customer (KYC) has been a bane of corporate treasurer’s lives for many years. With more than 1.3 million bilateral correspondent banking relationships across the industry, and countless more for corporates, how is SWIFT meeting the challenges and the needs in this complex arena?

Customer pushing block with happy face forward, leaving the unhappy block behind

There have been many proposed solutions for solving the issue of KYC over the years. Most have either struggled to deal with the increased complexity of the challenge, or were simply not fit for purpose. As a result, corporate treasurers have been crying out for an all-in-one solution to solve the KYC headache, and as such, global financial institutions and multinational corporations have had to collaborate and agree upon one centralised utility. Otherwise, all parties risk further fragmentation and complexity.

It was with this topic in mind that Treasury Today met with SWIFT and a host of corporates and banks at SIBOS 2019 to discuss the roll out of a brand new initiative which aims to solve the complex and time consuming process of ‘knowing your customer’.

The fact remains that KYC has always been a slow process. Despite today’s digital age, the process of ‘knowing your customer’ remains not only repetitive, but lengthy and cumbersome. Thomson Reuters ‘Cost of Compliance’ report 2017, found that it takes 24 days to complete the customer on-boarding process. There is a further challenge for global corporates when it comes to utilising a variety of banks across the world in different jurisdictions.

So, in today’s era of constantly evolving regulation and KYC obligations, both corporates and banks know the importance of simplifying the maintenance process of exchanging KYC data. To meet their evolving needs, SWIFT has stepped up to the challenge by recently extending its KYC Registry to corporates.

“Corporate treasurers cite KYC as one of the top three challenges they face in their bank relationships,” says Marie-Charlotte Henseval, Head of KYC Compliance Services at SWIFT. This is because many corporates hold accounts with several banks and subsidiaries, and this has resulted in time-consuming and costly reviews of KYC information.

Unfortunately, data is too often disseminated across multiple sources, and it can be incomplete or out of date. As a result, banks have to repeatedly follow up and update information with corporates. The extension of SWIFT’s KYC Registry to corporates will make the process more efficient for both corporates and banks.

Henseval continues: “This unique and well established utility already delivers huge benefits to banks, and its extension to corporates will extend them the same advantages, with a standard agreed by the community and a secure platform enabling efficient data sharing.” The opening of SWIFT’s KYC Registry to corporates is expected to address the inefficiencies arising from differing jurisdictional requirements and the lack of standardised data.

According to John Colleemallay, Senior Director Group Treasury & Financing at Dassault Systèmes: “KYC for Corporates is a dream come true for all treasurers, considering the heavy workload involved in providing the same documentation several times in multiple formats to our banking partners. We look forward to having a secured shared registry where we can more easily and rapidly complete the KYC processes.”

Today, banks are already able to access correspondent bank’s information through a standardised questionnaire (referred to as the KYC baseline), including the latest Wolfsberg Correspondent Banking Due Diligence Questionnaire (CBDDQ). As a consequence, banks are now able to implement enhanced and reasonable standards when it comes to cross border and correspondent banking. Not only is due diligence being proved, it reduces the need for any additional data requirements. With the extension of the registry to corporates, banks will also be able to access their corporates client’s information through a standardised questionnaire, designed with banks and corporate treasurers from around the world.

The corporate universe is of course vast, so it was important for SWIFT to ensure that the challenge was approached in a way that ensured that the new solution met the needs of every corporate treasurer, regardless of the industry they worked in.

SWIFT’S initial focus will be for the 2,000 corporate groups and their related entities that are already connected to the SWIFT network, simply because of tried and tested and long-standing relationships. However, the intention is to extend beyond SWIFT-connected corporates once feedback has been received.

Once the new Registry is finally opened to corporates, it is expected that SWIFT will start exploring collaboration with regional utilities, and partners that can be plugged into or integrated with the KYC Registry, in order to provide a full customer experience to banks. SWIFT’s ultimate goal is to create a one-stop-shop for banks to access information about all their clients with multibanking needs, irrespective of their size.

However, there are still many issues to be solved. For example, local regulations will need to be met to ensure their support, and it remains to be seen if the business model based on fees for consumption only will work out on the long run. Indeed, there are liability issues for SWIFT if it takes on responsibilities for certifying beyond the information the corporates are keeping ownership for. However, if SWIFT can iron out these issues the new KYC Registry might prove to be the cure for corporate treasurers’ KYC headaches.

To find out more, why not join the KYC Registry Engagement group where you can keep abreast of all developments in the project.

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