Client Due Diligence/KYC and Payment Processing – The Need for Automation

The financial services vertical is under pressure from regulators to address client due diligence, KYC and payment monitoring activities. This is a complex task given the number of clients, the millions of payments processed each year and the variability in regional regulatory requirements. As a result, compliance costs have increased to more than 20% of operating expense.

Containing compliance cost is a priority. A number of point-specific automation solutions are available but these have limited areas of application and often raise IT security issues. Both cause problems for all organisations. Data privacy regulations are now universal and all require that high levels of data and cyber security be implemented across the entire processing chain. In some regions, this includes the requirement that any client data be contained within the physical boundaries of the jurisdiction.

To date, the various regulations have been addressed via silo solutions managed by independent regional specific teams. This approach must change given the escalating cost of compliance and global consolidation of business operations – particularly within the systemically important institutions.

Eliminating the redundancy of multiple, often replicated, client due diligence/KYC and payment platforms requires re-engineering the legacy infrastructure and migrating this capability onto a single platform. This in turn will allow:

  • a single view of each client
  • an organisation wide operating model
  • consolidation of client and product data
  • aggregation of risk exposure
  • implementation of a rules engine for due diligence across client, product and location
  • centralisation of the customer documentation management system
  • robust data and cyber security

The introduction of a single platform does not mean the introduction of a single data repository. Specific data protection laws require both the physical storage within and non-transmission of data across jurisdictional boundaries. Thus, data must reside within dedicated local repositories with standardised processes and procedures for the entire organisation being synchronised from a central location.

Such a solution requires end-to-end re-engineering of the existing infrastructure, and implementing a new capability able to track complex, potentially long running processes, across a heterogeneous infrastructure. The solution should support a rules engine able to orchestrate specific product, client and jurisdiction requirements from a centralised location. This will enable alerts to be generated when actual and potential compliance breaches are identified, wherever these may occur globally.

To ensure complete client due diligence/KYC and payment controls, the solution must construct and maintain a register of all payment applications and the interfaces to those applications. This needs to be a completely automated electronic function, with the resulting registers being compiled and maintained in a central repository. This is essential to ensure the consistent implementation of an organisational wide operating model.

The financial services industry must eliminate multiple replicated client due diligence/KYC and payment platforms with an organisation wide automated solution. Only by so doing can compliance with multiple and sometimes conflicting regulatory, data and cyber security requirements be efficiently addressed across the entire processing chain.

Compliance costs consume more than 20% of overall operating expense. Reducing this cost is a priority for every organization. Complete automation of client due diligence, KYC and payment monitoring activities will introduce efficient compliance processes and contain the escalating cost of compliance.

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