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KYC - everyone looking for a magic bullet

You have to feel sorry for banks in their KYC efforts: the authorities keep on setting new legislation and corporates continue to complain about the admin overhead of complying with ‘their’ increasing demands. 

Bank KYC costs are huge

Consult hyperion’s June 2017 study - AMLD4/AMLD5 KYCC Know Your Compliance Costs - on the costs of the overhaul of the anti-money laundering legislation, in the fourth and fifth EU Anti-Money Laundering directives (4AMLD and 5AMLD), reports that they will significantly increase the frequency with which financial institutions will need to conduct ‘Know Your Customer’ (KYC) checks. Even before the new legislation, with current methods, these checks place an enormous cost burden onto financial institutions. Overall CH estimate that:

KYC and associated processes cost the average bank $60m annually. 

Not only this CH note that, “In addition to operational cost, banks that do not comply with the new legislation risk extremely punitive fines. In January 2017, the FCA fined Deutsche Bank £163 million for serious anti-money laundering controls failings. This is the largest penalty for AML controls failings ever imposed by the FCA (or its predecessor the FSA). Under the 5AMLD, regulators will have the power to impose much higher fines than this, as high as 10% of annual turnover for serious breaches.”

Other key findings were that:

  • Total costs for KYC processes range from £10 to £100 per check.
  • In the UK 25% of applications are abandoned due to KYC friction.
  • 4AMLD and 5AMLD increases both the frequency and scope of checks.
  • 4AMLD will impose fines as high as 10% of annual turnover for serious breaches.

New technologies can help

CH believe that mobile technology technologies can help to solve the KYC problem by using the high quality cameras on most smartphones to:

  • capture images of documents, authenticate the document
  • verify the identity of the individual.

And then use them in combination with advanced image processing and machine learning to reduce the costs of e-Identity. 

Sadly CH believe that the banks have to take things into their own hand, because they believe that the solution offered by the 5th AML directive - to use government-backed eID schemes - will in many cases will not be ready in time and even when they are ready, to achieve scale deployment and adoption will take several years.

The use of mobile technology will certainly help in overcoming the need for inperson-KYC (where the individual has to go to the bank to confirm their identity, e.g. A Nigerian bank recently demanded a corporate treasurer coem to the bank to prove their identity. 

Fully remote KYC

An article in Payments Cards & Mobile on the move to fully remote KYC suggested that Videoconference KYC might be the answer, but the problem is to implement automatic biometric face recognition within videoconference KYC. 

Other technologies

Many other biometric technologies are being adopted including retina scans and vein scans, but they all have their limitations technically or in acceptability.


CTMfile take: There is no single silver bullet in KYC for both consumers and businesses. Is a new approach needed?

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This item appears in the following sections:
Bank Relations & KYC
Bank Fees Reconciliation & Negotiation
electronic Bank Account Management

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