Globally, regulators are evolving their Know Your Customer (KYC) and Anti-Money Laundering (AML) policies for doing business in their jurisdictions to increasingly stringent standards. As such, banks are required to obtain, on a more frequent basis, more data and more documentation from their clients to comply with regulatory expectations. A number of challenges are arising as costs and complexity increase for both the buy and sell side. This is particularly true in APAC where multiple jurisdictions come into play.
Most clients deal with more than one bank, which means they now have to provide more detailed information, more often, at multiple points in time throughout their relationship. This becomes a labour intensive and time consuming task that often includes duplicated efforts. The cost and resources required for compliance on both sides have significantly increased over the years.
Complicating matters, banks often request the same information multiple times because their infrastructure historically lacks support for easy data and document provisioning internally. They also tend to deal in jurisdictions with specific laws regulating data secrecy that therefore prohibit sharing.
“The situation and indeed the community are screaming out for a solution,” explains Yasmeen Jaffer, Director of Business Development for Markit Genpact KYC Services. “Clients are getting requests for the same documentation from multiple banks and from multiple desks within each bank. Unless the industry reinvents how it manages client data, there is a risk that overheads and time to market will continue to increase for both sides.”
Adding to the complexity in APAC is that businesses typically cross multiple legal jurisdictions.
“Data privacy laws are often a challenge in Asia,” Jaffer says. “This is where people can get stuck – take, for example, Korea, which says that data cannot go outside the country. How do you provide your bank in Hong Kong with information, when you are domiciled in Korea? Another example is Japan, which doesn’t allow a bank to share information between its own internal entities.”
Other markets are implementing new laws on privacy, which can add an extra layer of complexity that needs to be managed and tracked. For example, in March of this year, the Australian Privacy Amendment Act came into effect, stipulating that all banks, pension funds and asset managers must obtain express consent to use personal information at the point of collection.
The industry is aware of the challenges for both the banks and their clients. Several organisations are already taking steps in an effort to standardise and simplify the process. Markit, a global financial information provider, and Genpact, a global leader in business process operations, has launched Markit | Genpact KYC Services to address this.
“Four global banks, Citi, Deutsche Bank, HSBC and Morgan Stanley, worked with us to design and deliver a better solution for their clients and partners,” Jaffer explains. “Our objectives are to lower costs and improve data quality for the banks and speed time to market for clients by reducing duplicative demands for information and documentation. We are delivering a standardised process through a common platform.
"In building the service with our design partners, we look at all data and documents required by each regulatory authority to determine the common data set. We then identify and agree the best practices in satisfying these requirements. Along with Genpact we are creating a standard policy and process for centralised client onboarding that is compliant for the jurisdiction in question."
"The industry as a whole simply can no longer afford the duplication of efforts when it comes to KYC. That is why, with the help of our design partners, we are organising process and technology into best practices so we can deliver a more efficient and flexible solution that works across jurisdictions," said Rampi Kandadai, senior vice president, Financial Markets Solutions, Genpact.
The service provides a platform for clients to upload documentation to satisfy various KYC requirements. It allows them to decide which banks have permission to access the information. The model ensures that the banks always have access to the information they require, and provides the clients with a single point of contact for KYC, requiring them to provide information only once.
“The service is live, providing coverage for UK and US jurisdictions," Jaffer says. "Markit already provides documentation and/or regulatory services to 900 buyside clients and 80,000 funds, 5,000 corporates and 80 banks so the work is incremental. Our focus now is on bringing the same service to APAC."
Diverse financial services providers throughout APAC will undoubtedly watch this evolving situation carefully and benefit from industry changes influenced by Markit and others.
For more information on KYC challenges and solutions, visit www.kyc.com
This article was developed with Markit and the Regulation Asia journalists.