Transforming client outreach: Executive roundtable summary & key learnings

In June, an executive roundtable was convened in New York to discuss the topic of corporate client outreach and onboarding in institutional banking. Senior executives from the largest banks were invited to share their perspectives, their challenges, and opportunities for transforming client outreach. The session was held under the Chatham House Rule where participants are free to use the information received, but neither the identities nor the affiliations of the participants are revealed. What follows is a summary of the discussion held that day.

Conversations continued from the recent Encompass whitepaper ‘Redefining client outreach in Tier 1 banking’ with a particular focus on digital expectations of clients and how banks can effectively transform their client outreach strategies.

Participants discussed the importance of understanding client needs. Sharing best practices, and how to leverage technology to simplify processes. They also addressed challenges and solutions for optimizing anti-money laundering/know your customer (AML/KYC) onboarding, standardization, and regulation. The importance of KYC risk management and centralized sourcing of documentation for AML refreshes were highlighted. Additionally, the need for standardized data identification and document collection processes.

Several actions for banks to consider were raised during the discussion, including the following:

• Consider providing clients with an AML checklist upfront.
• Explore taxonomy (aka KYC standards) standardization across the industry to align data requests.
• Evaluate the possibility of client-centric (versus bank-centric) portal models where large corporates own the data.
• Organize outreach of regulatory bodies like FINRA, SIFMA, FinCEN to discuss taxonomy.
• Develop testing approaches for bundling refresh requirements.

Six key takeaways:

1. There was no consensus on whether relationship managers or dedicated KYC analysts should handle client outreach and document collection. Several banks indicated that the front office was a critical part of the KYC process. Customer outreach generally only involved the AML/KYC operations teams as relationship managers were not as familiar with the regulatory requirements. There was, however, agreement that different banks have different operating models, with pros and cons to each approach.
2. Bundling or grouping client outreach requests, especially for funds/subsidiaries under the same parent, can improve efficiency. However, this needs to be balanced with the client’s preferences and internal processes. Participants also noted that while outreach for single entity refresh was not onerous, bulk refresh of corporate entities was challenging.
3. Offering subject matter expert calls can help clarify requirements. Participants agreed this was a helpful alternative and instilled confidence in corporate entities that their banks were willing to support their clients.
4. Using confirmation (e.g. “nothing has changed” attestations) instead of full documentation re-collection during periodic reviews can save effort, but is more challenging for institutional clients that undergo frequent changes. Trigger events like mergers and acquisitions (M&A), negative news, etc. often necessitate full re-reviews.
5. Repetitive client outreach is a persistent challenge. Often due to human errors in initially identifying all requirements, policy/regulation changes not being incorporated in a timely manner, or operational handoffs causing delays in comprehensive document review. Centralized teams of KYC experts could help mitigate this.
6. Digital client portals have potential benefits such as centralized documentation and streamlined communication. However, these face adoption challenges from clients having to use multiple portals across banks. Harmonizing requirements across all banks is difficult. Creating a consistent taxonomy/data standard could facilitate a shared utility but would require substantial coordination across the industry.

 Key pain points:

1. Lack of standardization in KYC requirements across banks

• Different banks ask for diverse information from clients, leading to frustration.
• No agreed taxonomy or standard set of documents/data points.
• Not possible to harmonize all requirements across banks. Will need to focus on baseline requirements.
• Personally identifiable information (PII) can be a security issue in how data is collected and maintained.
• KYC databases today are specific, e.g. Bankers Almanac focusing on bank master data and SWIFT KYC including corporate data.

2. Challenges in coordinating outreach for clients with multiple entities

• Clients comfortable sending emails but hesitant to upload to a portal.
• Clients typically take outreach more seriously when the relationship manager reaches out, as opposed to a KYC analyst from the bank.
• Difficult to bundle requests for large corporate clients with many subsidiaries.
• Clients may have different KYC contacts across regions/entities.

3. Manual processes are inefficient

• Need for automation to streamline KYC data collection and tracking.
• Manual follow-ups and spreadsheet tracking are error prone.
• Need to take a risk-based approach to outreach, particularly when looking to conduct full updates versus periodic refresh.
• Also need to be aware of client pushback where there is information already uploaded to official registries and other public sources. Regulations state that banks can use registry information for gathering data and subsequent client validation.

4. Determining the right client contact for outreach

• Reaching out to the wrong person slows down the process.
• Relationship managers may not be the ideal KYC experts.

5. Limitations of existing digital KYC portals/utilities

• Bank creates its own KYC portal.
• User adoption challenges.
• Lack of a clear industry leader or standardized platform.
• Portals will be home grown or a combination of vendors.
• Concerns around data privacy, security, and control.
• Need to agree on a common set of documents and standards that can be stored and shared centrally for KYC use only.
• Need regulatory push to drive standardization.

Conclusions

• There are different operating models for client outreach and KYC processes across banks. Some have relationship managers (RMs) driving the outreach, while others have centralized teams or a combination of both. There are pros and cons for each model, considering each approach in terms of client experience, efficiency, and compliance.
• Bundling or grouping KYC requests for related entities (e.g. funds under the same manager) can improve client experience but has operational challenges in ensuring all requirements are met consistently across the group.
• Confirmation of existing KYC data during refreshes is more common than collecting new data, but this depends on factors like elapsed time since last review, risk rating changes, and regulatory updates. Handling of PII is also a consideration.
• Repetitive client outreach is a key pain point, often caused by missed requirements in the initial outreach, changes in bank policies/risk assessments mid-cycle, or operational lags in implementing new regulations.
• Trigger events can be a solution to continual outreach, ensuring reviews are event driven rather than periodic.
• Digital portals for client KYC data sharing are seen as a potential solution, but face challenges around adoption, standardization across banks, and balancing security/privacy concerns.
• It is incumbent on banks to create efficient outreach processes. Operating models need to be optimized to include publicly available information where possible and to validate with the client, as opposed to continually reaching out to client for all documents. Outreach should only be necessary for material changes and be as simple as possible after other internal validation procedures have been completed.

Summary

Overall, the discussion highlighted the complexities and tradeoffs in designing efficient and customer-friendly KYC processes while ensuring regulatory compliance across diverse client portfolios. The discussion underscored the critical need for transforming client outreach to evolve their client outreach strategies, emphasizing the importance of understanding client preferences while leveraging technology to enhance efficiency.

Click here to read our whitepaper ‘ Redefining client outreach in Tier 1 banking’.