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Swift Builds Out Financial Crime Compliance Business with KYC Data Utility

Swift is pushing into compliance services for financial crime regulation with a dedicated business unit that is offering a Know Your Customer (KYC) data utility and planning additional solutions including business intelligence tools for regulatory compliance.

A pilot of the Swift KYC Registry went live this week with a group of Swift member banks. The banks were selected on the basis of their locations in America, Europe and Asia, and their type, to include global, regional and local banks. These users of the pilot system will be named soon, ahead of the release of a light version of the registry this summer and a more populated version of the registry towards the end of the year.

Luc Meurant, head of banking markets and newly appointed head of Swift’s Compliance Services business, explains: “Compliance with financial crime regulation is at the top of the agenda at many banks. It is an issue that all our customers are concerned about and it costs a lot of money, but it doesn’t deliver competitive advantage to any of the banks. The duplication of KYC tasks across banks and the lack of competitive advantage make KYC requirements suitable for the cooperative development of a solution that can scale across customers and countries.”

The Swift KYC data utility is designed to reduce KYC-related costs and mitigate compliance risks by providing banks with access to a central repository of up-to-date institutional information collected by Swift from participating banks. Swift will host and manage the utility, verifying the completeness, validity and accuracy of data provided, while banks will retain ownership of and responsibility for their information. The initial focus of the service is on correspondent banking, an area that Swift knows well, but it could be extended in future. Meurant suggests corporate or securities data could be added to the utility, although he notes that Swift would need to partner to add these types of data.

Meantime, he says: “When we consulted our members about a KYC data utility we received unanimous support. There is huge interest in this. There are 7,000 correspondent banks and more than a million relationships between them. The KYC Registry will have entries from the 7,000 banks, allowing them to gain the information they need from a central utility and achieve dramatic improvements in efficiency.”

Swift set up its Compliance Services business unit in September 2013 offering two existing sanctions solutions: Sanctions Screening, an off-the-shelf screening solution to help institutions comply with multiple sanctions lists; and Sanctions Testing, a hosted platform that assures the effectiveness of sanctions filters. The plan is to continue to add financial crime compliance solutions such as the KYC Registry to the unit and build a team of towards 100 staff working on financial crime by the end of this year.

The unit’s next move will be into business intelligence for compliance with tools designed to help banks monitor compliance risks by looking at their Swift activity on a global basis and comparing it with overall traffic on the Swift network. Meurant describes the business intelligence tools as a data management development as they will use global transaction data already stored by Swift and deliver data visualisation and monitoring, and an alerting system. These tools are due for release in the second quarter of this year.

Reflecting on the bigger picture, Swift chairman Yawar Shah, concludes: “The board has given Swift a mandate to address the financial crime compliance needs of banks worldwide. This is a natural evolution for Swift as an industry-wide cooperative extending its strategic offering beyond payments and securities into compliance services.”

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