How should we tackle the new KYC challenges?
In the aftermath of the financial crisis and several recent cases of fraud, money laundering, and tax evasion, today’s worldwide attention is mostly focused on financial institutions’ anti money laundering/ counter terrorism financing (hereafter AML/CTF) duties and obligations. The focus is especially on the way the institutions apply underlying controls on their counterparties. Legal frameworks and related professional standards have changed and are still evolving drastically, increasing compliance requirements toward market actors, which therefore increases pressure on regulators to enforce the rules.
As a result, financial institutions are struggling to comply with this ever-evolving AML/CTF and tax transparency framework. The entire Know Your Customer (hereafter KYC) process chain needs to be enhanced to ensure that all counterparties’ information is collected, qualified, stored, monitored, and screened, including related parties and the shareholding structure. The resulting risk assessment must be reviewed on a recurrent basis, including the risk of reputation, which until recently was often underestimated. On that basis, reaching sustainable compliance in a cost-effective way is an objective for the industry, now more than ever. This must coincide with an increased volume of KYC documents/data to be collected and processed, with strong requirements to decrease onboarding time, especially in the fund industry or in digital banking structures.
Inside magazine issue 13, October 2016
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