August 2018

Katja Zschieschang, Deutsche Bank’s KYC Business Execution Director, discusses with The Banker the benefits of a collaborative approach to data collection to help reduce the costs of compliance

KYC requirements have placed a strain on the resources of even the most established providers of financial services – with firms required to compile vast and highly granular data sets. To give an idea of the scale of this demand for data, Swift estimates that there are 1.3 million bilateral relationships across the banking industry – demanding an enormous quantity of data to gather and assess .What’s more, every time a new relationship is added, banks in the network are obliged to update their records accordingly.

And there can be no question of not staying up to date: the consequences of poor KYC can be severe. On a commercial level, failure to understand the risks inherent in the payment flows of both clients and clients’ clients raises the risk of fraud, cybersecurity attacks and other operational hazards – and that’s before you factor in the hefty fines imposed by regulators intent on maintaining the highest standards.

Collective solutions

Zschieschang notes, however, that global standards for the sharing of customer information are developing – providing financial service providers with more efficient means of gathering the necessary data. In March 2018, a report from the Financial Stability Board Committee on Payments and Market Infrastructures (CPMI) backed several collaborative initiatives, aimed at more effective information sharing. By increasing the use of utilities serving as shared central repositories of KYC data, the time and cost of bilaterally sourcing and preparing information can be reduced.

Most notable among these shared data repositories is the Swift KYC Registry, which operates with standardised questions and terminology in order to develop a common understanding across all financial institutions. In 2017, the Registry was aligned with Wolfsberg’s Correspondent Banking Due Diligence Questionnaire (DDQ) – the de facto standard for correspondent banking KYC due diligence information. This means user can now fill in their DDQs using data taken directly from the KYC Registry, without the need for reformatting or filling in gaps.

In February 2018, the DDQ was revised to make it easier for banks to source a complete picture of their relevant counterparties – still a longstanding pain point for financial institutions. This move was met with widespread approval, including endorsements from global regulators such as the CPMI, the Financial Action Task Force, and the Basel Committee on Banking Supervision.

Of course, shared utilities such as these are no silver bullet for the challenges of KYC compliance, but they play an important role in lightening the load by spreading it across the community of financial institutions.

To read the full article, click here.

To read the complete Cash Management Guide, click here.

Katja Zschieschang

KYC Business Execution | Business Control Unit | Global Transaction Banking | Deutsche Bank

Katja Zschieschang

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