augmenting customer due diligence: the importance of a connected approach to data and technology
Customer Due Diligence (CDD) was on the agenda as Encompass, alongside Dun & Bradstreet and Dow Jones, hosted a breakfast seminar that looked at current challenges and the place of technology.
The event explored the importance of a connected approach to data and technology when conducting CDD.
Held in London last week and attended by various individuals working in the financial services space, it was led by a panel comprising of Encompass’ Head of Alliances, Nick Ford, Chris Laws, Global Head of Product Development at Dun & Bradstreet, and Alex Tame, Global Director, Partners and Content Integration for Dow Jones.
Following on from a survey which questioned compliance professionals about the issues they face when it comes to onboarding and compliance, topics discussed included:
- the impact of evolving regulation on compliance teams
- common challenges and priorities
- benefits of intelligent automation for CDD
- how technology and data combined can be a strategic driver
As those in attendance considered how the challenges they are seeing affect them on a daily basis and what the landscape may look like in the future, there were common themes that came to the fore, such as:
When tasked with onboarding new clients to a tight transaction deadline, going through the KYC process in a short space of time often brings difficulties.
The reflection was that many deadlines imposed, when the norm is 2-4 weeks, are too tight and the result is that firms have to either pass on the opportunity, or invest in additional staff time to complete the task and retain the client. This presents them with significant challenges, as revenue is lost and there can also be a detrimental effect on relationships with clients.
The availability and accuracy of information is also a key area which was discussed at the breakfast seminar. An important point brought up was the question of being able and confident enough to rely on data firms get back when performing KYC in a short space of time. This is something that can have significant knock-on effects and that, it is thought, has to be tackled.
Barriers to accessing datasets
- Consistent yet affordable data. The best in class datasets cost because they are the most reliable and invest the most in keeping up to date.
- Free data – Just because data is free doesn’t mean it’s easy to access
- Translation – Although many registries gather the information needed to conduct CDD, the reliability of language translations comes into question. All too many times analysts have to go back to the original source to be able to trust registries have translated properly.
- The difference in consistency between a dataset and a client.
Another key topic of discussion was the identification of beneficial ownership, as the room reflected that this is very much changing.
While considering this topic, the ways in which regulation and location have evolved and make a difference were highlighted as it was brought up, as an example, that, if you’re working in Europe it is assumed UBOs can be found. However, If in North America, there is less support and a dip in regulation enforcement, resulting in two different laws fighting against each other.
In the UK, the person of significant control list exists but there are still big gaps, conflicts and, it was pointed out, it is difficult to ensure data remains up to date.
This is a particularly relevant topic, as it was reflected that, when it comes to integrating new technology with legacy systems there is always some level of compromise. There is no one technology solution that solves everything – some do it on a basic level but don’t have the detailed analysis needed, while others solve one particular problem very well but don’t fit in with any other systems.
There is a need to find something that can slot in as and when is needed. This will require collaboration, as vendors need to come together without pushing integration problems on to clients.
With any process, consistency is key and CDD is no different. Inconsistency in procedures and how tasks are carried out leads to inefficiency and showing a level of consistency is particularly important to firms in their aims to demonstrate ongoing compliance.
So, how do organisations deal with changes – in policy, people and processes – and keep the information that they use consistent? The answer is control, according to the panel. There must be a push towards ensuring control over where information is gathered from and how it is used.
New solutions should run alongside legacy solutions, side by side until the point in time that one is ready to be switched off, it was said.
Banks are still looking for technologies that get data directly from the client they are onboarding. Looking to the future, it is felt that there needs to be either a shift in regulation or a client portal where the data can be uploaded in order for this to work and impactful change to be seen.
the importance of automation
The discussion ended with a focus on the automation of data gathering and CDD processes. All three panelists noted how automation is the direction a number of firms are looking to in order to combat the challenge of customer due diligence.
It was noted that, during the 2019 Innovate Finance Global Summit, Mark Carney, Governor of the Bank of England, made the point that in the not too distant future we will have the technology to create a complete end-to-end automated CDD platform. Regulation and the banks need to keep up with this rapid shift in technology in order to fully harness the power it will bring.
Founded in 2012 by entrepreneurs Roger Carson and Wayne Johnson, Encompass is the creator of unique, innovative Know Your Customer (KYC) automation software that enables better, faster commercial decisions. The company is driven by the belief that the best decisions are made when people understand the full picture, fast.
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