Risk Management

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Step Away from the Edge: Facing the KYC Cliff Although treasurers are preoccupied with the effects of the Covid-19 pandemic, everyday challenges still have to be met. With the average global treasury team reportedly spending more than one day each week dealing with know your customer (KYC) requirements, compliance remains a significant pain point for treasurers worldwide.

Step Away from the Edge: Facing the KYC Cliff

Step Away from the Edge: Facing the KYC Cliff

By Eleanor Hill, Editor

With the average global treasury team reportedly spending more than one day each week dealing with know your customer (KYC) requirements, compliance remains a significant pain point for treasurers worldwide. What progress is being made to help treasurers – and their banks to overcome this headache? Are regional approaches worthwhile or should we be holding out for a global solution? Can fintechs save the day? Industry experts answer these questions and more.


Werner Fontanive

Werner Fontanive
Member of the Executive Team of SWISS POST and Head of New Business Regulatory Data Services, Co-founder, cinfoni

Although the extraordinary coronavirus pandemic is occupying treasurers’ minds at present, everyday challenges have by no means vanished. One of the top day-to-day pain points treasury teams face is dealing with the KYC requirements of banks across the globe. In fact, recent research supported by SWIFT shows that 93% of treasurers believe KYC requests are more challenging today than they were five years ago. In addition, more than 50% of treasury professionals have reduced the number of banks they work with to avoid lengthy KYC processes.

Marc Delbaere, Global Head of Corporates and Trade, SWIFT, neatly outlines the issues behind these eye-opening statistics: “Treasurers who work with multiple banking partners in different regulatory jurisdictions across the globe have to provide KYC data in multiple formats, often through bilateral exchanges, in order to meet the regulatory requirements of each partner, which is costly, time-consuming and inefficient.”

Expanding on this, François Masquelier, Founder and CEO of SimplyTREASURY, adds: “Ultimately, KYC negatively impacts the client experience. Opening new bank accounts takes up more and more time. Furthermore, KYC costs are inflating significantly as requirements add up and are not standardised. In addition, data and documents are transferred via unsecure means, which translates into high levels of risk around sensitive pieces of information.”

Paul-Gerhard Haase, Member of the Executive Board, Co-founder, cinfoni BFS finance GmbH, agrees: “Some of the major issues revolve around the lack of standardisation, inconsistencies – even within the same institution, and multiple communication channels with banks. What’s more, KYC requests are often ‘blanket’ and therefore too intrusive, with no tailored data requests.

Adding to the challenge, there is frequently a lack of integration between Bank Account Management [BAM] and/or Treasury Management Systems [TMSs], which in turn requires multiple document uploads.” Werner Fontanive, Member of the Executive Team of SWISS POST and Head of New Business Regulatory Data Services, Co-founder, cinfoni, adds: “The sharing of KYC information is based on trust which is provided under cinfoni through a government backed network that exchanges regulatory reliable data from corporates via full validation nodes towards banks.”

In this seamless digital day and age, this labour-intensive approach to KYC seems out-dated and even alien. Yes, it is easy to place the blame for this on the banks, but as Delbaere rightly notes: “It’s not any easier on the financial institutions’ side of the process.

They have to reach out to correspondent banks or corporate customers for information and search for data across multiple sources, which is often incomplete or out of date. In many cases, they are forced to repeatedly follow up with existing customers as part of regular KYC reviews, which can place strain on relationships. In short, it’s repetitive, confusing, time-consuming and costly for all parties involved.”

All for one and one for all?

The rationale for a global solution to these KYC issues has never been clearer. And SWIFT has been making significant headway with its KYC Registry, which opened to corporates in late 2019. But is it enough to turn the tide?

Marc Delbaere

Marc Delbaere
Global Head of Corporates and Trade, SWIFT

Delbaere says: “It is still early days but we have developed a strong pipeline of interested corporates, some of which have already started uploading information on to our registry. Before launch, we tested the KYC registry with 18 leading corporate groups, including BMW, Spotify, and Unilever, along with 16 global banks representing more than 7,000 corporate-to-bank relationships on SWIFT. This meant that when it opened to corporates, we already had strong interest from trial participants and we have followed this up by promoting it to the 2,000-strong corporate community connected to SWIFT.”

But therein lies the rub. The utility is currently open only to SWIFT-enabled corporates. As a former corporate treasurer, Masquelier has mixed views on the situation. “SWIFT’s KYC Registry is certainly a huge ‘plus’ and a great step towards a multi-bank international KYC solution. We have great expectations for it. However, SWIFT still lacks regulatory standards in individual jurisdictions and does not allow for 100% coverage of specific KYC information.” Masquelier speaks from experience here as his former employer, RTL, took part in the first round of pilots two years ago.

Nevertheless, the solution is still nascent and there are only a handful of pilots that can be used as a baseline. Concerns also exist around the barriers to entry. Masquelier continues: “I remain cautious about the business model and hope that this will be – and remain – free and not just for SWIFT customers. We must think of all those treasurers who do not have, or do not want to use, the SWIFT network, especially due to the cost and complexity of SWIFT’s Customer Security Programme.”

As a side note for those who have not come across it, SWIFT launched its Customer Security Programme (CSP) in 2016 to drive industry-wide collaboration in the battle against the cyber threat. Designed to support all types of customers, from central banks to large corporate groups, the CSP provides tools, information and a framework to help the SWIFT community secure itself. Despite the positives, the change has proved challenging for some.

François Masquelier

François Masquelier
Founder and CEO of SimplyTREASURY

Masquelier believes there is room for several players in the KYC utility space, with SWIFT being a major participant alongside local and regional initiatives. In fact, he says that targeted initiatives, such as the Nordic KYC Utility, “emerged because of the absence of fully international ones. Facing such a KYC cliff pushed some actors to think locally, before considering global solutions”.

For those not familiar with the Nordic project, six of the largest banks in the region have now joined forces to launch a platform for handling KYC data. Due to launch during 2020, the idea is that the utility will benefit large and mid-sized corporates in the region. The word on the street is that the Nordic banks did not wish to wait for the SWIFT KYC Registry to be adapted to local needs and formats, as they felt the Nordics would be at the back of the queue from a priority perspective. The plan was always to integrate with the SWIFT offering once it was fully operational. But the waiting was too unappealing, especially since the banks saw the launch of a KYC solution as a means to help repair the reputational damage caused by recent money-laundering scandals.

In the name of transparency, it is worth noting here that TMI asked to speak to several Nordic banks about the utility for the purposes of this article – yet they declined. Perhaps it is too early to comment. The website for the initiative (www.kycnordic.com) simply displays a ‘coming 2020’ message. Or perhaps the realities of investing in a joint KYC utility – and each bank still being individually liable for satisfying KYC obligations – are taking their toll, alongside the building of the infrastructure, of course. Only time will tell.


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