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KYC and seizing the benefits of change

By Howard Wimpory | Tue 17 May, 2022
KYC and seizing the benefits of change | Encompass blog

Know Your Customer (KYC) is one of the more expensive and complex aspects of fighting modern financial crime.

Globally, compliance costs regulated firms an estimated $214 billion per year, with nearly two-thirds of that sum allocated to people, rather than technology. A significant portion of this will go towards KYC projects, with customer risk profiling emerging as the top challenge for financial institutions (FIs) across Western Europe.

However, KYC expenditure is not solely a function of planned project costs.

Over the past five years customer due diligence (CDD) and monitoring were among the most frequently cited points of failure in regulatory enforcement actions in the UK and Europe. However, against this strained backdrop, KYC remains a manual process.

There are good reasons for this. Take anti-money laundering (AML) compliance, for example. KYC is a critical element of AML compliance, helping firms identify bad actors and prevent their criminal proceeds being used for illicit purposes. However, the rapid evolution of AML regulations has left little time for firms to pause and reflect on their processes, let alone find new ways to improve them through technology. Added to this is the complexity of operating across multiple jurisdictions, where different rules and interpretations are shaped by geopolitical pressures.

While compliance is a critical element of the KYC equation, it is essential not to think of KYC transformation purely as a regulatory exercise. Indeed, designed and implemented well, a robust, scalable and efficient KYC operation puts the customer at the center of everything a business does, supporting low-friction experiences with the potential to unlock value across whole organizations. Of course, transformation also helps institutions strengthen their defenses and better shield themselves, and wider society, from financial crime.

Beyond compliance and protection, fundamental reforms of KYC are also being pushed by a range of strategic drivers. These include the need to seize opportunities presented by the rapid acceleration of digital transformation plans in response to the Coronavirus pandemic, as well as the need to meet rising expectations of customers concerning the speed and quality of service they should expect from providers.

With all these goals in mind, many large FIs are now embarking on wholesale KYC transformation.

While automation and technology are fundamental to creating more robust and efficient KYC programs, a similarly complex web of factors will contribute to the success (or failure) of transformation initiatives. To achieve the best outcomes, FIs must view KYC transformation holistically, taking into consideration the same challenges associated with any large-scale change program.

However, they also have a tightrope to walk, since they must also ensure they achieve continued, if not improved, levels of KYC compliance.

To find out more, read our latest whitepaper, Embracing KYC transformation, where we explore the need for KYC transformation, the factors driving the need for change, potential challenges and the blend of ingredients required to help ensure a successful outcome.


Embracing KYC transformation

Explore the need for KYC transformation, potential challenges, and steps to ensure success

Author: Howard Wimpory

Howard works with Tier 1 banks to digitally transform their KYC onboarding and refresh processes. He has held a number of executive-level operational roles with a major global bank including leading their wholesale KYC Onboarding and Refresh functions. His most recent role prior to Encompass was as Managing Director, Group Financial Crime Operations position at Barclays Bank, where amongst other functions, he was accountable for leading KYC Remediation of Corporate and Investment Bank Client records to FCA committed timeline.

LinkedIn Profile | Howard Wimpory

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