In the last 2-3 months, Bloomberg and Refinitiv have withdrawn/started to withdraw their KYC services as they both found that there was not enough demand for the total KYC solution to warrant continuing. Now there are now only two or three major KYC solutions left:

• Swift KYC not yet live
• IHS Market
• Encompass.

But there are other solutions emerging which may have the solution to the global problem that every supplier and bank has of cost-effectively on-boarding/checking new customers AND cutting out money laundering.

Money laundering driver

The Financial Action Task Force (FATF) estimates that there is $800bn-$2tn money laundering every year. Recent examples include:

• UK Financial Conduct Authority review of ‘Understanding of Money Laundering Risks in the Capital Markets’, released on 10 June 2019, which pointed to gaping holes in sampled participants’ defences and suggest that enforcement action is warranted
• “Filtering gap” in the AML and sanctions controls in its London office in a major bank
• the Dutch Fiscal Information and Investigation Service has shut down a cryptocurrency mixer service Bestmixer.io over concerns that it facilitated money laundering
• Both France and Germany face legal action by the European Commission over their failure to fully implement the European Union’s (EU) Fourth Money Laundering Directive (4MLD – 2015/849), which took effect on 26 June 2017.

But money-laundering can be stopped, or dramatically reduced:

• “Turkey’s anti-terrorism measures used extensively following the attempted coup in 2016, have severely impacted the fight against unassociated money laundering and economic crime” according to Paul Cochrane in the Money Laundering Bulletin
• Corporate KYC programmes can reduce money laundering dramatically too.

De-risking has been a popular solution which involves:

• Closure of suspect bank accounts and relationships
• Closing correspondent banking relationships

But it doesn’t really solve the problem, what is required is a complete KYC solution that solves the fundamental nature and drivers.

KYC is a huge multi-dimensional problem

KYC solutions need to deal with many different dimensions in business and technology, for example:

• Multiple regulations at a global and a local level which overlap and often don’t agree
• Multiple technologies with no single standard for e-Identity
• No digital signature laws
• Etc.

Not only this, there are so many myths that have built up about KYC that it is difficult to separate myths from facts. 

But maybe we are starting to see that:

• A single central solution doesn’t/won’t work?
• Blockchain-based solutions might be the answer?
• There needs to communication between the KYC platforms, rather than just one single KYC solution?

The one thing that is clear is that a new approach is needed, the withdrawal of Bloomberg and Refinitiv from the integrated KYC platform must be telling us something.

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CTMfile take: Over the coming weeks and months we will examining the different KYC platforms and approaches to understand what is best for corporate treasury departments.