Business intelligence services are aiming to make the process of ‘know your customer’ faster and more cost-effective by standardising the questions asked by banks: automating the process and placing all relevant records online, thereby centralising it.
Using standard industry measures, a KYC request can take up to two months to complete; but online services utilising 'big company data' and employing a central querying system could make the process virtually instantaneous.
Know Your Customer records can include the collection and analysis of basic identity information (often called a 'Customer Identification Program' in the US) as well as data that verifies someone is not a politically exposed person (PEP), or has any history or intention of partaking in money laundering, terrorist finance, or identity theft.
KYC processes must now be employed by firms, across the board, to ensure other companies or individuals they are intending to do business with comply with anti-bribery and anti-corruption laws, among others, as well as to demonstrate they have performed adequate due diligence.
Such policies are helping to reduce global levels of financial fraud, identity theft, money laundering and terrorist financing, where they are regulated by countries at the state level. They also assist businesses in managing their risk better - both in terms of balance sheets, and their present and future reputation in the marketplace.
'Know Your Customer' and 'Customer Due Diligence' - whether this is 'Reduced Due Diligence' / 'Simplified Due Diligence' or 'Enhanced Customer Due Diligence' - have never been so important.
Recent years have seen a swathe of record-breaking fines and penalties administered by regulators worldwide, notably in the US and UK, dominating the financial services landscape.
One of the biggest of these was a $1.91bn penalty issued to HSBC in December 2012 for failures in its anti-money laundering procedures. Barclays was fined nearly $300m in 2010 over alleged sanctions breaches in Iran, Cuba and Sudan - and in December 2012, Standard Chartered was fined approximately $300 million for its part in sanctions breaches concerning operations in Burma, Libya and Iran.
This upswing in fines has mainly been driven by regulators identifying failings in firms’ compliance with money laundering, sanctions and tax requirements.
Analysts have advised cultural changes by small and large financial service companies alike, towards compliance-driven objectives, if they wish to avoid the regulators' hammer in 2014.
Cross-border companies particularly, must demonstrate a robust compliance framework ensuring that they have sufficient oversight of each territory they are operating in, and that Anti Money Laundering (AML) regulatory requirements are being followed, both locally and at the global level.
