RegTech Intelligence

KYC regulatory challenges: on deck and ready to go?

JWG analysis.

Firms have plenty of planes in the air right now.  The regulatory pressure on firms to ‘get KYC right’ in the form of new financial crime regulation, such as FATCA or AMLD IV, and huge fines means they will need to juggle these changes amidst an ongoing regulatory implementation effort.

How you need to treat your customer in 2017 will be drastically different to how they are treated today.  MiFID II’s array of requirements will reshape how customers need to be identified, classified, informed, marketed to and traded with.

There is little time to get ready.  MiFID II’s changes will take many months to complete and getting ready for the 2017 deadline means getting proactive now.  The changes will place corresponding pressure on firms’ Know Your Customer (KYC) processes and systems – and there are, as yet, few industry standards to meet these requirements.

We have had a dozen or so firms in attendance at our three Customer Data Management Group meetings in Q1 and, collectively, we have explored the demands for customer information from 11 tax, trading and AML regulations and discussed the new EU standards required over the next 18 months.

The data JWG has collected is conclusive: a huge internal ramp-up of KYC resource at each firm is imminent.  Common regulatory interpretation is needed for both the data vendors and the customers if the industry is going to get this right.

The sheer number of rules requiring KYC information will cause significant challenges for firms to interpret the information requirements and then get the data – from either vendors or the clients themselves – over the next 3 years.

Key areas of concern identified by CDMG members are the effort required to source and validate new AML due diligence information alongside tax workflow requirements and MiFID II’s suitability and appropriateness regime.  However, while these regulations were being resourced individually, senior management were not yet sufficiently aware of the consolidated impact.

The CDMG felt that it was important to 1) raise ‘top down’ awareness to the operational impact of these regulations and 2) promote ‘bottom up’ solutions through worked examples of the business case for reducing the interpretation challenges through a ‘KYC requirements clearing house’.

Accordingly, we will hold 2 meetings in April.  This first one is open to all members of financial institutions but will be focused on the supply chain to agree, amongst other aspects, the areas deemed appropriate for collaboration and sharing (a dial-in will be available).

JWG is developing a whitepaper on MiFID II’s KYC challenges that will serve as context for the two meetings.

As ever, if you would like to discuss your particular challenges, please get in touch.

Email if you wish to attend, or see here for more details.

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