“independent outlook on kyc landscape - independent outlook … · customers...
TRANSCRIPT
ByDenise Lim
Partner – Risk Assurance,
PricewaterhouseCoopers
“Independent Outlook on KYC Landscape"
Presentation by PricewaterhouseCoopers (PwC)
IBF Connect (Compliance) 2016"GETTING COMPLIANCE READY FOR FINANCIAL SERVICES IN 2020”
Contents
Introduction
PwC 2
Evolving landscape of KYC utilities 3
Risks & Rewards 14
Further considerations 17
Q&A 19
Evolving landscape of KYC Utilities
PwC 3
Evolving landscape of KYC Utilities
Need for industry-
wide collaboration
PwC 4
FI perspective
Increasing KYC costs and length of time to complete necessary checks
Pursuit of an ever changing regulatory target
‘Good enough’ vs. risks of KYC failure (e.g. reputational, operational, legal, concentration)
Financial institutions face scrutiny by global regulators of anti-money laundering (AML) processes, systems, and controls.
Sub-optimal customer experience
Customer perspective
Multiple and duplicated information requests and points of contact
Long onboarding process
Time consuming renewals
Regulator perspective
Difficult to oversee individualFI approaches and processes
Increasingly onerous and complex international standards
Recent top tier banks’ KYC failures
Individual regulators could rely on KYC services provided by a utility
Market drivers
OV
ER
VIE
W
KYC/AML, FATCA data and documents, but no regulatory service willbe provided.
Initially focused on legal entity data and relationship between legal entities.
Full-service offerings (onboarding, maintenance, analytics & reporting).
Partnered with other service providers for sanctions, adverse media & PEP check services
Partnered with Genpack to launch KYC Services (KYC.COM), an enhanced version of Markit’s legacy Counterparty Manager product (MCPM).
CTI acquisition brings Tax Compliance / FATCA into scope with credible service.
Partnered with other service providers for sanctions, adverse media & PEP check services
Partnered with several large banks to offer centralized KYC document repository for correspondent banks.
Provides SWIFT activity reports showing banking activity with high risk countries
Launched Accelus IDOrg web-based portal in Aug 2014.
Leverages the strength of Accelus world-check and IntegraScreen from counterparty risk assessments, sanction checks and detailed entity and individual background checks.
Acquired GoldTeir to support document collection and management
TA
RG
ET
S
EG
ME
NT
Banks/Broker Dealers (consumers of information). Investment Managers, Hedge Funds, and Corporates (providers of information)
Broker-dealer, institutional and corporate banking businesses of banks and other financial institutions
Correspondent banks and their clients
Financial institutions and their clients including correspondent banks, asset managers, hedge funds and corporations
Evolving landscape of KYC Utilities
Key players
PwC 5
Evolving landscape of KYC Utilities.
a utility which is designed to undertake core due diligence on behalf of all regulated entities within a single
jurisdiction, potentially mandated
Types of Utilities (2/2)
3
Jurisdictional Utilities
PwC 6
Evolving landscape of KYC Utilities.
Industry Collaborations Utility Service Providers
a utility developed by a specialist venture in collaboration with partner financial institutions.
a utility or similar ‘KYC as a service’ offered by a single provider
Types of Utilities (1/2)
1 2
PwC 7
Customers
Financial institutions
Now
• Significant process redundancy
• Length new client acceptance periods
• KYC as one of many tasks
• KYC spending as ‘cost’
• Frequent regulatory oversight
• Inconsistent KYC standards
• Marginal KYC effectiveness
Now
KYC Utility
Long term
• Scale of economies for all through utility datasharing
• Rapid and uniform new client acceptance
• KYC as core competency for a central utility
• Potential reduction in
regulatory visits
• Common KYC standards
• Optimal KYC effectiveness
• Jurisdictional reputation enhanced
Long term KYC shared utility
Customers
Financial institutions
Customers
Utility 1 Utility 2
Medium term
Medium term
• Limited scale of economies for market
• Utility FIs achieve benefits of scale and average cost model
• Only utility FIs customers benefit from more rapid client on-boarding
• KYC standards only common within the utilities and notacross the market
• Benefits for regulators limited to
utility providers
Financial institutions
Evolving landscape of KYC Utilities
KYC Utility development
8PwC
Evolving landscape of KYC Utilities
Evolution of Utilities
Identification and Verification
9PwC
Ongoing CDDMonitoring &
ReportingFalse Positive
reduction
Implementation of advanced ID
standards
Evolving landscape of KYC Utilities
Moving to a higher authentication standard
Biometrics are a mechanism to authenticate a user iswho they claim to be. The authentication defines theinherence (who you are) via bio-feature scores with theuse of technical sensors.
Main Applications of Biometrics:
1. Authentication
2. Access and attendance control
3. Travel control
4. Financial and other transactions requiring authorization
5. Remote voting (authorization)
6. Use of automatic working devices
7. Action control
10PwC
Evolving landscape of KYC Utilities
What are biometrics?
Analogue Digital Advancement
One to one matching
One to one matching
RFID matching
OCR recognition
Biometrics
One to one confidence
One to many uniqueness
11PwC
Evolving landscape of KYC Utilities
Biometrics are not all created equal
Fingerprint
Hong Kong Immigration
• 437 e-Channels had been installed at all control points
Translate
illuminated
images of
fingerprints into
digital verification
Voice
Citi Call Centre
• Automatically verify a client’s identity in under 15 seconds
• No PINs or lists of
questionsneeded
Numerous unique
biological traits
that go into
producing
signature sound
Face
Bank of Montreal
• Verify transactions using selfie pay
Detect faces and
quantify their
features to match
against database
Behaviour
Telesign
• Analyse keystrokes,mouse movements and touch-based input on mobile devices
Create profiles of
quotidian habits
and run
application
silently to verify
Iris
Unique patterns in
the coloured circle
around pupils to
authenticate
Singapore / Malaysia border
• Avoid the long queues for checking passports for 50,000 motorcyclistsdaily
DNA
Most reliable form
of identification by
taking a physical
sample
FBI
• DNA samples to be processed using Rapid DNA systems locatedin police booking stations
• Include palm print and facialrecognition in country’s Identification System (NAFIS) for police access
Multimodal
Add
authentication
factors to
overcome the
limitations of a
single technology
Australian government
12PwC
Evolving landscape of KYC Utilities
Moving to an industry view
Implementing high and inescapable ID standards that
cannot be duplicated
ID could be shared across FI’sas could ongoing Due Diligence of each unique entity within that cohort
Moving it or itspublic key to ashared registry
13PwC
Risks & Rewards
PwC 14
Risks & Rewards
What are the benefits of adopting a KYC utility model?
The potential cost efficiencies gained through centralisation of
onboarding processes
Earlier revenue recognition for banks through a reduction in the time required to make customer
acceptance decisions
Improved customer service levels through a reduced number
of touch points and reducedon-boarding times
Increased standardisation of KYC quality and compliance
across the industry
PwC
18
15PwC
Risks & Rewards
Quality of the information provided by the Utility
PwC
19
(quality does not comply with bank’s policy)
Incomplete KYC Information (additional client
outreach may be needed to satisfy any requirements over and above what’s received from the Utility)
Screening requirements
(KYC utility screening proceduresmay be aligned with thebank. E.g. a bank might have a different view of what is seen as significant adverse news
Operational Controls
(lack of controls in place especially when the Utility relies on the information
provided by other third parties)
Banking Secrecy
(the usage, safekeeping of client information and controls in place may not be in line with BS requirements)
KYC utility’s information contradicts other
trusted sources
(when considering signing up to multiple KYC utilities)
Risks associated with KYC utilities
PwC 16
Further considerations
PwC 17
Further Considerations
What to consider before selecting a KYC utility?
Operations Governance
SelectionTechnology
How will the utility’s systems integrate with existing technology?
What technology can be rationalised to deliver cost savings?
How robust are the utility’s information security processes?
Technology
Operations
What is the business case for using a utility?
How do existing onboarding procedures need to be updated?
What ongoing monitoring will be required to manage the performance of the utility?
What happens with the utility offers a new service or product?
Regulatory How do a utility’s standards align with existing KYC policies?? What elements of current requirements will need to remain ‘in-house’?
Regulatory
Who are the key stakeholders in the KYC process?
What is the optimum governance model for implementing and maintaining oversight of performance?
Governance
What is the output from the utility? What other services does the utility
offer? Are there strategic benefits to partnering
with a particularutility?
Selection
Legal
Legal What are the legal implications and data privacy concerns of using
a utility? What contractual risks are there during implementation of a utility?
PwC
21
PwC 18