LONDON/NEW YORK – Increasingly protracted, complex and costly processes associated with Know Your Customer (KYC) compliance and record-keeping underscore the challenges expressed by equally-sized pools of about 1,100 financial institutions and their corporate customers in response to the latest pair of independently-conducted Thomson Reuters surveys. As was the case in 2016, while financial firms have continued to invest significant resources in KYC, the compliance issues and concerns both they and their clients face appear to be rising.

According to the survey, financial institutions with $10 billion or more in revenue have seen their average spend on KYC-related procedures increase to $150 million this year from $142 million in 2016, while their number of deployed employees has skyrocketed to an average of 307 KYC compliance professionals in 2017 from 68. Despite this rise in headcount, just over a third of firms reported that scarce resources remain their biggest challenge in conducting KYC and customer due diligence (CDD) processes.   

Looking at the process of on-boarding, corporations’ expectation that their customer on-boarding time would rise this year were borne out -- with the average increasing to 32 days from 28 in 2016. On the other side, despite their ongoing investment, banks claim that it now takes 26 days on average to onboard a new client, up from 24 days a year ago. Both groups surveyed expect on-boarding times will rise again in 2018, with financial firms anticipating a 12 percent increase, while their corporate clients contrastingly view that on-boarding times will increase by 24 percent in the next 12 months. Underlying this differing perception is a more notable disconnect: banks say they contact their clients on average four times during an on-boarding process whereas corporations report being contacted on eight occasions by their bank representatives.     

For financial firms, documenting and maintaining current KYC records to keep compliant remains difficult, with just 18 percent of banks surveyed only taking action when an event occurs to trigger a KYC review. And in 2017, less than one third (30 percent) of corporate respondents make their banks aware of all material changes involving KYC and CDD. Among financial institutions, just 8 percent think their clients are proactive when reporting material changes, down from 14 percent in 2016.     

Financial firms and corporations cited the impact of continuing KYC regulatory change worldwide in 2017 as being the biggest driver affecting their compliance processes. Nearly three-fourths of all banks say changes in legislation and regulation are motivating them the most to explore KYC program adjustments, while changes in KYC regulation mean they need to constantly refresh their customer records to stay compliant. This correspondingly is causing corporations to allocate added resources to supply more detail to their banks, with the average corporation spending 26 days a year to provide additional KYC regulatory information, up from 23 days in the 2016 Thomson Reuters survey.  

“While our global surveys show compliance challenges remain significant for banks and corporations, those that take a proactive approach to the regulatory environment by using available technology to streamline KYC processes can put themselves ahead of the curve for competitive advantage,” said Dominic Mac, global head of KYC Industry Solutions at Thomson Reuters. “Financial firms are being pressured to focus both on current compliance and prepare for upcoming changes. This year’s survey reveals a change in the dynamics of KYC, with large firms spending $150 million in 2017, up from $142 million in 2016, and expecting their CDD and KYC outlays to rise a further 13 percent over the next 12 months. For corporations, the ability to standardize and securely share KYC information is crucial to overcoming such problems, and digitization is a key enabler. At Thomson Reuters, we remain committed to working with corporations and financial institutions to help them streamline the process by uploading and maintaining one set of KYC documents from a more secure central location, eliminating the need to keep responding to uneven, duplicative or sporadic requests from their banks.”

The surveys – administered in April and May 2017 to an evenly proportioned set of respondents in leading regional markets in Europe (UK, France and Germany), the U.S., South Africa, Singapore, Hong Kong and Australia -- involved 1,023 respondents at financial institutions and 1,122 respondents at corporations. All were engaged within their organizations in KYC-related compliance activities, encompassing processing of and adherence to client on-boarding and CDD.

Since its 2014 launch, Thomson Reuters KYC as a Service (formerly Org ID) now serves over 50 major financial institutions and asset management firms, manages over 350,000 KYC records and publishes more than 1.25 million continuously refreshed legal entity profiles in over 140 countries with translated extracts from over 60 languages, helping customers accelerate their client on-boarding, comply with regulation, reduce costs and improve their client experience.

Thomson Reuters KYC as a Service has earned significant recognition from the financial services industry, winning a 2017 OpRisk Award for “Best Outsourcing Service,” and an OpRisk Award for “Best Managed/Support Service Provider of the Year” in 2015. Thomson Reuters KYC as a Service also was selected for a 2017 FStech Award as “Risk Management Software of the Year.” At the FTF News 2017 Technology Innovation Awards, Thomson Reuters KYC as a Service was nominated for “Best Client Services Solution” by peers who previously chose Thomson Reuters KYC as a Service to receive two FTF Excellence Awards -- in the categories of “Best Operational Risk Management Solution” and “Best AML/Anti-Fraud Solution.” Thomson Reuters KYC as a Service also received in 2015 and 2014 the Data Management Review Award for “Best KYC & Client On-Boarding Solution” – as awarded by A-Team Group, senior managers at a variety of financial institutions and the publication’s readership.

Thomson Reuters

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