KYC costing banks €50m a year as sanctions soar

A typical European bank, serving 10 million customers, could save up to €10 million annually and avoid growing regulatory fines by implementing Know Your Customer (KYC) tech processes, according to new research.

Mitek and Consult Hyperion found that following new EU Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) rules extending the scope of KYC requirements, the annual cost of punitive non-compliance fines has risen to €3.5 million.

When things go wrong, these fines could soar into the tens or even hundreds of millions, the report suggested. The risk of reputational loss, losing license to operate, and even personal liability of senior management, are also increasingly significant for banks which get KYC wrong.

“It’s no longer good enough for banks to simply accept the costs associated with inefficient processes – the consequences are now much more serious,” said Steve Pannifer, report author and chief operating officer at Consult Hyperion. “We’ve seen the Financial Conduct Authority recently issue fines to several major banks, amounting to £176 million; but even that fine was dwarfed by the €775 million fine handed to a single bank by Dutch authorities.”

Inefficient onboarding is a key driver behind a 56 per cent abandonment rate for banking customers - up from 40 per cent two years ago - with customers often abandoning the process as soon as they’re asked to visit a branch face-to-face with their passport and utility bills.

“The future looks bleak for banks who don’t comply with KYC, or whose processes are so cumbersome that they can’t attract new customers,” said Rene Hendrikse, EMEA managing director at Mitek. “To avoid falling far behind their nimble challenger rivals – and behind the traditional counterparts who are turning to innovation to survive – investing in the right technology at the right time will be crucial.”

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