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Data Management Summit: Finding Solutions to the Data Management Problems of Client Onboarding and KYC

Increasing enforcement of Know Your Client (KYC) regulations and large fines for non-compliance are driving banks to review client onboarding processes and make changes that will not only help them meet regulatory requirements, but also improve the client experience, increase efficiency and reduce time to revenue.

The data management challenges of client onboarding and KYC, as well as the approaches that banks are taking to tackle the challenges, were the subject of a panel discussion at A-Team Group’s recent Data Management Summit in London. A-Team editor Sarah Underwood moderated the discussion, which was joined by Romain Thierry, head of client and trading account platforms at UBS; Kelvin Dickenson, vice president of compliance solutions at Alacra; and Neil Farquhar, compliance product manager at Bureau van Dijk.

Starting the discussion, Underwood questioned why banks are putting so much effort into client onboarding. Thierry answered, saying: “They have no choice. Banks have shrunk, there is pressure on costs and more regulation. Operations teams supporting client onboarding have been eroded, yet the complexity of what they must do has increased dramatically. This is a specialist business. Even if banks use technology, they still need knowledge and a front to back office perspective to understand issues such as who owns client relationships.”

Dickenson added: “Almost every challenge and opportunity in a bank is based on understanding clients at the onboarding stage, perhaps understanding the risk of a client or whether the bank already has a relationship with a client. This makes client onboarding a first step towards profitability and regulatory compliance.” Beyond regulatory requirements, Farquhar noted: “KYC makes good business sense as banks need to know their clients. Without good client onboarding and KYC processes they leave themselves open to risk.”

Tackling the challenges of KYC compliance, some banks are working with entity data providers to streamline processes and others are looking at innovative technology solutions such as dedicated data management utilities. At a more clinical level, banks are de-risking client portfolios by eliminating high risk client records that are costly to maintain and generate little revenue. Reversing the typical leadership trend, Dickenson noted that the US is ahead of Europe in terms of KYC requirements, but trails Europe in the availability of data.

Considering the data management issues around client onboarding, Thierry described the necessities of data ownership and governance, saying: “The need is to drive business ownership of the processes that generate data and build ownership schemes that will last into the future.”

Turning to new approaches to client onboarding, Underwood asked the panel about the feasibility of utilities. Dickenson explained: “We are seeing the emergence of syndicated KYC models in the market. They are likely to be successful, but accountability for KYC will remain with banks. There won’t be a one-stop-shop for the whole onboarding process. Instead, we expect banks to use one or more utilities to help them streamline the most painful parts of the process, particularly document collection, verification and going back and forth to the client for information, which adds delays and time to revenue.”

Concluding with advice on how to tackle the data management problems of client onboarding, Farquhar said: “As with other compliance programmes, the process of client onboarding needs to be managed from the top down.” Similarly, Dickenson noted the need for business to take ownership of onboarding, and Thierry added: “The first step is to understand that onboarding is a key part of the client experience. The next step is to start to think about it differently, perhaps considering the use of innovative solutions such as utilities to access and manage client data.”

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