Connected Due Diligence: Why the Industry Needs Mutualized KYC
Changes are underway in how financial institutions handle Know Your Customer (KYC) compliance. Firms have historically been loath to outsource sensitive risk and compliance functions. Recently, though, fiscal and regulatory pressures have prompted a rethink.
The tightened budgets of the post-financial crisis (2008) period have led firms to seek reduced costs by turning to outsourcing, managed services, and utilities for non-value added activities. Meanwhile, regulation has grown more onerous, increasing the burden to firms in terms of people, time, and cost, including for KYC.
While the increased operational costs of KYC cry out for a solution, the potential risk means firms must maintain high standards in KYC compliance processes and policies, making them wary of outsourcing this function. Connected due diligence, in which an independent supplier provides a common portal to support the operational activities of multiple firms, shows promise as an answer to this dilemma.
This report, commissioned by Markit, sets out the potential benefits of a mutualized KYC portal, including: improved client experience, reduction of redundant effort, support for standardized industry policies, and improved KYC data.
“The connected due diligence approach can help elevate the industry to a higher standard, and remove some of the risk inherent in go-it-alone standards creation,” said Neil Katkov, PhD, senior vice president, Asia, and author of the report.