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The problems with KYC: too long, inconsistent, security, no standard

The problems of excessive contact from financial institutions, inconsistent requests and security concerns continue to be the main pain points for corporates facing the KYC compliance process, according to research by Thomson Reuters. The survey of more than 1,100 corporate executives earlier this year highlighted several problems with the KYC process globally.

1. Lack of KYC standard

The research found that one of the main problems facing corporates – and their banking partners – is that there is no global standard for know your customer (KYC) regulations, so different banks will have varying documentary requirements for their corporate customers. The report states: “Survey respondents reported an average of 10 global banking relationships — each one placing different demands on corporates, resulting in frustration, rising costs and wasted time.” Corporates were also frustrated with having to deal with many different people within the bank.

2. Contact with too many people within bank

The report – KYC compliance: the rising challenge for corporates – also found a disparity in the amount of contact required between corporates and their financial institutions during the KYC process. The FIs said that they need to contact corporate clients on average four times during the KYC compliance, while corporates reported an average of eight times.

3. Companies not reporting material changes

Another issue that was highlighted in the survey was reporting material changes within the organisation, such as a merger or change of a key executive role. The complexity involved in reporting such changes is deterring corporates from making their banking partners aware of the changes. Thomson Reuters found that companies had on average six material changes in the two-year period before the survey – but just 30 per cent reported these changes to their partner FIs. It's not hard to see why: the average time corporates spend updating their FIs about material changes is now 30 days, up from 27 days in 2016.

4. Security concerns

Concerns over security and who is viewing documents is also an important issue for corporates, partly because the documents required for KYC include the personal documents (such as passports) of company directors.

5. Compliance is taking longer

Complying with KYC regulations is also taking longer for corporates and companies are now spending an average of 26 days on the process, up from 23 days in 2016. However, corporate customers claim that, on average, they are spending 32 days on KYC compliance. And half of FI respondents thought the time taken to onboard was likely to increase in the coming year.

6. 12% changed banks because of KYC

The survey also found that 12 per cent of companies said they had changed banks as a result of KYC issues.

The research was carried out in April and May 2017 and gathered responses from 1,122 corporate decision-makers from the UK, Germany, South Africa, the United States, Australia, Hong Kong, Singapore and France in roles including treasury, risk management, compliance, finance directors, financial controllers, procurement, corporate secretaries and general counsel.


CTMfile take: The lack of a global standard for KYC compliance is making life difficult for corporates, whether in compliance, treasury or other roles, and this survey really underlines that.


This item appears in the following sections:
Fraud Prevention
Anti-Money Laundering Fraud Prevention
ID Systems & Services in Fraud Prevention
Operations
Control & Compliance in Operations

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Comments

By Paul Stheeman on 2nd Nov 2017:

The Thomson Reuters survey clearly states the six main problems corporates have with the KYC processes at banks.

In reverse, it would be interesting to find out how many corporates do a KYB (Know Your Bank) check in order to be sure that their banks are living up to the standards a good corporate follows and what these checks look like.

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