Sibos: KYC data utility managers report compliance barriers

Know-your-customer data executives from Barclays and Standard Chartered tell Sibos audiences that adoption of the Swift KYC registry requires persuading their compliance teams of its capability and value

David Howes, Standard Chartered Bank

Internal compliance teams are the ones that need convincing when it comes to embracing utilities, according to David Scola, global head of coverage at Barclays. 

Scola was speaking at a session titled "Utilties: a year on" at the Sibos conference currently under way in Singapore.

Third-party shared services for storing KYC reference data are about two years old, and the panel was focusing on the Swift KYC Registry in this early phase of its development.

Concerns about data privacy and security are one impediment to the wider adoption of utilities, which service providers such as Swift claim can provide cost savings and efficiency for banks. "The first step before we go out and ask our clients in good faith to use this, is making sure we have our own documentation online," said Scola. "To do that, we have to deal with our own internal compliance teams."

"This has become a common theme I'm hearing from a lot of folks: there's some resistance from compliance," he added. "They're not sure they are willing to use documents that are stored in a central repository."

Scola said he tells those who are uncertain about repositories that such storage is no less secure than a bilateral exchange of information by email, or even by fax, especially given the security built into utilities.

"A second argument is that rather than in the typical KYC refresh cycle, where we go to our clients once every year, or two or three years, and ask them for this documentation, once you have subscribed to a bank's documentation, the utility automatically updates you every time new information is posted," he said.

Barclays discovered that putting the documentation in the repository for subscribers to use has been a surprisingly time-consuming process, according to Scola, but the bank cliams to have uploaded data for 50 of its 80 entities and expects the remainder to be online by January 2016.

Another panellist, David Howes – himself a compliance officer – added a third argument: that utilities such as the KYC Registry potentially free up resources otherwise spent on the "hygiene factor" – data validation and so on – and actually focus on the real risks, not the process.

Howes, who is deputy head, group financial crime compliance at Standard Chartered Bank, said: "The base level is taking away some of the hygiene factors around customer due diligence/KYC that then should allow us to spend our energy on what business is coming through from the client, are we comfortable with that business, and if not, what are we going to do about it?"

Howes added: "Frankly, it's difficult to explain to a regulator why we as an industry struggle with this hygiene ... but we do."

Howes said it was too early to tell if Standard Chartered is reaping the benefits of the KYC Registry yet. But he concluded that utilities are important because their use speaks to even broader issues – namely, transparency in financial systems, and that banks need to show they can contribute to society. "This is pretty important if we are going to continue to be relevant in an environment where, as many are talking about today [at Sibos], blockchain is emerging and fintech start-ups have a different view as to how this industry should work.

"We ought to be ahead of that in thinking about how we do business in a way that is safe and compliant." 

This article was originally published on sister website WatersTechnology.com.