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Digital financial crime: KYC and joining the dots

By Nick Ford | Thu 24 October, 2019

Digital regulation and navigating the ‘fog of innovation’ were the subjects of discussion as financial crime practitioners, regulators and regtech experts gathered for a roundtable hosted by RegTech Associates.

All things Know Your Customer (KYC) and the digital financial crime landscape as we currently know it were on the agenda as representatives from more than 20 global banks, asset managers and fintechs were among those represented at the event sponsored by Encompass, Evalueserve and Tookitaki.

It is more critical than ever that financial institutions create more connected and sustainable KYC frameworks to both prevent and detect illicit financial flows, and this formed the key focus of the roundtable, which addressed the following questions:

  • how do financial firms select the products that solve their specific problems?
  • what are some of the challenges associated with today’s KYC processes and systems?
  • how can we address these challenges in a way that creates a more sustainable KYC framework?

An important part of the session, which Encompass VP of Strategic Alliances Nick Ford was part of, focused on exploring the topic of ‘navigating the innovation fog’. There is so much innovation around – and in many different forms – but who is really delivering meaningful solutions? That was the question posed by RegTech Associates’ Co-Founder & CEO Jason Boud.

During an interesting slot, he explained how some vendors are innovative but that others lack a clear understanding of banks’ needs. This leads, he said, to customers having unreasonable expectations and, ultimately, slows down the adoption of regtech solutions.

Talk then moved to the subject of what can be done to address these problems – or ‘connect the dots.’ According to Mr Boud, it is only by understanding which products address which problems that progress can be made.

Questioning how this can be done in a way that creates a sustainable KYC solution, it was acknowledged that breaking through the ‘fog’ can be a real challenge for financial firms, with limited time and capacity to conduct thorough market scanning exercises.

Participants agreed that, in general, there is a willingness to embrace innovative technology solutions but organizations do come up against common barriers to adoption, including:

  • herd mentality – where financial firms choose the same product, because it has a credible track record in the industry and is already deployed in peer organizations
  • risks of onboarding a small, relatively new vendor
  • difference between what innovative solutions say they offer and what is actually delivered
  • lack of compelling business case – focus on cost efficiencies rather than increasing human capacity to address more complex tasks e.g. investigations

The difficulties – and solutions – around KYC were also brought to the fore, with the diverse group of attendees giving insightful viewpoints on what they come up against.

Pain points highlighted included issues with remediation of legacy systems, the inability to efficiently share data within an organization to create a single view of the customer, and the level of inconsistency found in terms of interpretation and regulatory expectations of key financial crime requirements.

So, how is sustainable KYC achieved?

Participants shared their opinion on the key points, including the balance between human and machine intelligence, as well as improving collaboration, as the FCA also gave input.

Overall, the roundtable delved into important, timely issues, providing thought-provoking discussion, as participants agreed that there is a need to shift from talk to action if we are to see sustainable, effective KYC approaches.

Author: Nick Ford

As VP Strategic Alliances at Encompass, Nick is responsible for leading the overall strategy and revenue growth from partners and distributors globally. Nick joined Encompass at the end of 2017, bringing a wealth of business development and sales experience within the financial sector. Nick has a deep understanding of KYC and client onboarding, data and the adoption of new technology and services.

LinkedIn Profile | Nick Ford

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