FIs ‘must improve KYC efficiency’
Written by Chris Lemmon
Financial institutions need to improve the efficiency of their KYC and sanctions remediation processes or risk losing business, a new report has found.
The study from LexisNexis Risk Solutions revealed that seven in 10 professionals in financial institutions are worried that customer friction caused by inefficiencies in these practices is resulting in lost business.
KYC and remediation procedures are in place to investigate whether a new or existing customer flagged as a potential financial crime or sanctions threat, poses a genuine risk.
Over half (59 per cent) of the decision makers surveyed stated that their current KYC and sanctions remediation processes are less than very efficient (63 per cent of small-mid sized firms and 54 per cent of large firms), which has a subsequent negative impact on their organisation.
The biggest factor impacting process efficiency was found to be disparate and siloed data systems, with three in five of those with less efficient processes citing this as a key concern. The next two most common factors were the lack of a single risk view for customers and prospects, and the time required to maintain an audit trail, both cited by 59 per cent of respondents.
Michael Harris, director of financial crime compliance at LexisNexis Risk Solutions, said: “Inefficiencies in Know Your Customer and sanctions remediation processes can result in a huge cost for financial institutions, due to the negative effect they can have on business operations. This cost can be both reputational and financial.
“Significantly, disparate data and a lack of a single risk view were flagged as two of the major causes of inefficiencies, highlighting how important having access to the right combination of information and technology is when conducting remediation activities.