KYC remains a pain-point for all, despite numerous attempts to build utilities and reduce the burden on businesses and banks alike. What can treasurers do to comply with this essential process more easily? We ask those involved about much-needed relief.
“In many cases, they have been asked to supply new information at a far more granular level of detail than ever before,” observes Manoj Mistry, Managing Director of IBOS (or the ‘International Banking – One Solution’ Banking Association), the trade organisation of global correspondent banking service providers. “Faced with losing valuable access to banking services, the degree of exigent coordination across an organisation to obtain current and consistent information has created a sizeable burden among treasurers and their staff.”
Relatedly, the information burden for correspondent banking relationships is perhaps the most onerous. Use of previously ‘standard’ information is now by and large negated, with Enhanced Due Diligence (EDD) rules now superseding past regulations, and bankers asking for a ‘global minimum’ standard EDD information that is substantially more critical and inquisitive about client relationships. “In order to supply this level of data, and to keep it refreshed on a periodic annual basis, it has created additional complex and time-intensive workload for smaller corporate teams,” he comments.
It’s true also that greater digitisation in the global payment systems has created a new responsibility for real-time authorisations from treasury. “Whilst in the past, large money transfers and payments were covered under the KYC master file, recently, many banks are requiring individual authorisations even for regular payments (such as monthly vendor invoices),” notes Mistry.
But with banks currently using a mix of internal and vendor tools, “getting them to agree on a single solution is like herding cats,” states Mistry. Perhaps most challenging of all though, he believes, is the ability of anyone to monitor global regulatory developments and then create a ‘global minimum standard’ that banks and regulators can agree on, and which corporates can support.
Whilst Bureau van Dijk (part of Moody’s) has good coverage of EU private companies, “that’s about it,” notes Mistry. “The Americas and ROW remain a ‘Wild West’, with 100% reliance on what private companies claim is true – no independent verification is possible.” J.P. Morgan’s Trivedi further observes a general corporate resistance to uploading relatively sensitive data into a third-party source, many citing data privacy and security as a concern.
For Mistry, global corporates should make greater investment in the internal talent and skillset which could conduct surveillance on the latest regulatory updates, and then develop effective responses. “In many large corporates today, these services are outsourced to external legal firms, which have proven to not always be the best option when it comes to defining business-prudent solutions to complex regulatory requirements.” Internally keeping data accurate and easily accessible offers considerable pain relief.
At a regulatory level, there is a growing case to be made for large corporates to exercise their substantial jurisdictional public policy lobby capabilities, “positively influencing the development of regulations”, suggests Mistry. “This could be in collaboration with banking partners or industry associations.”
Whilst much of the recent policy updates governing KYC and AML have focused on mitigating emerging risks from ‘bad actors’, he feels providing greater strength to regional regulatory bodies to impose sanctions on member banks has an unintended consequence. Indeed, in many instances, more stringent local interpretations of the actual risk and its related policy mandate have created an even greater burden among corporates and their banking partners to profitably comply with the regulations.
Read the full article in Treasury Today here.
