What we hear from the community is that KYC has been one of the biggest challenges in compliance, both for financial institutions and corporates. It’s a process that is often frustrating for all sides.
Treasurers are busy looking at ways to introduce efficiencies into their processes and improve the often cumbersome, costly and time-consuming KYC practices that have historically existed.
Heightened expectations from regulators have created an ever-more demanding regulatory environment for banks and financial institutions and, with the increase in the speed and volume of payments, this is unlikely to change in the short term.
What are the specific challenges for corporates? And how do you think they can overcome those challenges?
One of the biggest challenges is the lack of standardisation in the information that is required by banks. Typically, a corporate that wants to start a new relationship with a bank would receive a KYC questionnaire with both private and public information required. This information is re-produced by the corporate multiple times in different formats with the different correspondents they are doing business with. This process is clearly repetitive and an unnecessary duplication of effort.
What are the specific challenges for corporates? And how do you think they can overcome those challenges?
One of the biggest challenges is the lack of standardisation in the information that is required by banks. Typically, a corporate that wants to start a new relationship with a bank would receive a KYC questionnaire with both private and public information required. This information is re-produced by the corporate multiple times in different formats with the different correspondents they are doing business with. This process is clearly repetitive and an unnecessary duplication of effort.
What’s the solution to that? Are we looking at technology?
We launched the KYC Registry back in 2014 to focus initially on correspondent banking. The registry is a secure central global platform, where financial institutions upload their information in a standardised way as well as access their corrrespondents’ information. They keep control not only of the information that they provide, but also on who can access the data. User-controlled access is one of the key principles of the platform. When we built it, we developed a standard – a clear set of data and documents that is required, agreed by the financial community – which cuts out much of the time-consuming bilateral exchanges.
The initial scope was correspondent banking – and it’s been a great success. We now have more than 5,500 banks using the platform. We are now expanding the scope of the service to corporates, meaning that we will allow corporates to upload and maintain their due diligence information in a standardised way as well.
Has this been welcomed by corporates? Are you getting good uptake?
This was requested by our corporate clients and therefore is very welcome. Knowing that there was a solution in place for banks, it was natural that corporates also wanted it to be available for them. We have had enormous success on the correspondent banking side with the registry, and so we are now extending it to the corporate segment.
We will launch the service later this year with an initial focus on corporates connected to SWIFT. Over time, we aim to extend the service to non-SWIFT connected corporates too.
The issue that treasurers often have is that it’s difficult to integrate new initiatives like the KYC Registry with their CMS system. Is this something that you’re looking at and something you’re hoping to solve?
Definitely. Integrating the registry into the internal process of an institution requires a project to be put in place. This should determine who owns the data , who will upload it to the platform and who will maintain it, all questions that should be addressed upfront. As well as how will the CMS interacts with the registry.
Today, SWIFT has developed an API to automate its KYC Registry, it enables banks that consume information from the platform to automate and integrate that data directly into their back-office systems. Over time it is our ambition to enable corporates to load the registry directly from their CMS/TMS systems.
What other plans have you got to develop the registry? Where do you see it going medium to long term?
We have set up a working group of banks and corporates that is refining the requirements for the launch of the KYC Registry for corporates. Our early adopters will be able to test the platform in the coming weeks. In Q4, it will go live for the SWIFT corporate community.
Why is there a need for KYC and why do treasurers really need to focus their efforts on making sure that the KYC is in place?
Handling KYC is a prerequisite to doing business for most corporates. Some of them see it as beneficial, while others see it as necessary task. Either way, it is a big part of their role today.
Corporate treasurers are interested in any efficiencies that can improve their process, especially when it comes to reducing the amount of bilateral exchanges. This is what we will achieve by opening the KYC Registry to corporates this year.