Investment banks based in Asia Pacific region lead investment into Client Due Diligence/Know-Your-Customer (CDD / KYC)
Thomson Reuters today revealed key findings from a new Asia Pacific (APAC) survey which shines a spotlight on the KYC compliance challenges facing financial institutions in response to the changing global regulatory environment.
The survey, conducted at the beginning of 2016, involved 334 respondents working in financial institutions across APAC, representing firms that have an aggregated global turnover of USD$6.7 trillion and 25,000 staff working specifically on the adherence and processing of CDD / KYC globally.
Overall, survey results indicated rising costs associated with KYC; a shortage of appropriately skilled staff and the necessary technology to manage a constantly evolving set of regulations (including sub-regional regulatory overlays); increased client on-boarding times which slow the pace of business transactions, inconsistent requests for information, excessive client contact to the detriment of the client relationship; and a distinct lack of adequate ongoing monitoring, resulting in potential risks being overlooked.
Survey highlights by financial institutions based across APAC include:
Investment banks in APAC were the financial firms recording the highest average levels of global expenditure on CDD / KYC at USD$100 million annually, compared to a significantly lower spend by regional and retail banks (at approx USD$30 million).
The costs to on-board a client has increased by an average of 18 percent over the last 12 months across APAC and is expected to increase by a further 14 percent over the next. Costs to on-board from an investment bank perspective have risen the highest (27 percent) with the trend expected to continue by a further 20 percent into the next 12 months.
Almost 4 in 10 (39 percent) financial institutions across APAC cite a lack of people as the main challenge in conducting a CDD/KYC process. This is particularly challenging for investment banks where just over half (52 percent) are struggling to fulfill this requirement.
The average time to on-board a new client is 26 days, Investment banks recorded the longest average client on-boarding time of 33 days, while retail banks recorded the shortest at 23 days. However there is significant variance on onboarding times: the longest onboarding time recorded in the survey was 63 days (by an Australian firm.)
Steve Pulley, Global Managing Director, Client On-boarding and KYC Solutions at Thomson Reuters said: “These findings reinforce what the financial industry already knows: it’s costing them more, and taking them longer, to onboard new customers, to maintain client records and crucially to keep on top of the increasing burden of global regulation. If they are able to rely on established KYC services in their region, such as Thomson Reuters Org ID, they can improve regulatory compliance, the time to onboard new customers and the overall client experience.”