These processes can take a considerable amount of time to both fulfil and satisfy regulators’ requirements.
As a result, the cost of being compliant escalates as financial institutions try to stay ahead of terrorists and fraudsters.
Organisations with a global footprint usually have their policies drafted from headquarters; which can create further problems. Local regulatory nuances are often ignored, becoming problematic further down the line when certain KYC procedures cannot be implemented in offices in certain countries.
Regulation is a fast-moving area and jurisdictions are constantly updating their mandates and obligations;for any global firm it is imperative that a coherent and well-implemented global KYC and AML frameworks are in place.
Overcoming these challenges is no easy feat. Issues tackling technology can be solved with the introduction of shared ledger facilities although building and the time it takes could prove to be disruptive, at least in the beginning.
There is no denying that automation can help ensure that financial institutions comply with international regulations. While regulatory technology, or ‘RegTech’, now offers some solutions maximising the potential associated with these solutions within an organisation will very much depend on the skilled use of the technology and specialist knowledge.
To successfully reap these benefits, organisations must require the correct knowledge, expertise and manual skills to operate them, which is why see an increasing number of firms turning to external service providers.
As described above, the KYC and AML processes are a real challenge within organisations. The processes are arduous, time-consuming and prone to high-risk factors. In many organisations, regional teams follow a common process, but a lack of communication across each office can lead to a host of problems, including duplication of work and multiple requests are made to the same entity via different routes, which negatively affects clients. Even with an in-house shared ledger facility, the real benefits can be missed. Populating a database is all well and good, definitely the first step, but how the algorithms are used to extract data, check and update it, analyse and communicate it efficiently requires expert know-how.
A trusted service provider can not only set up the shared ledger facility but also manage it to ensure that all regions communicate with one another by sharing the same analysed information.
There will always be a need for the human touch, no matter what technology is in place.
RegTech might be able to improve efficiency, cost and speed by automating a manual process, as well as help streamline and simplify it, but the main benefit will be ongoing client monitoring. Software can monitor not only the client after the on-boarding exercise but also the regulatory scene worldwide.