The idea of KYC compliance has traditionally been associated with AML, PEP checks and international sanctions, however the new wave of regulations that is to begin rolling out in 2015 will place a whole new set of pressures on businesses to ‘know their clients’.
Rachel Wolcott, writing for Accelus’ Compliance Complete, has highlighted the issues posed by these new regulations on compliance processes.
- “Enhanced regulatory scrutiny on AML systems and controls” will require businesses to pay greater attention to the personal details of potential and existing clients
- The US FATCA incorporates a system whereby firms are required to “verify customers’ US tax status and determine whether they are subject to 30 percent withholding”
- EU regulation, especially the Banking Union Reforms and MiFID II, are seeking to better protect consumers. Firms are under increasing pressure to “document their sales carefully” as well as provide consumers with KIDs to avoid complex and potentially confusing products.
In order to help financial services firms comply with many of the new data keeping KYC processes, a handful of global companies are in the process of rolling out shared KYC utilities which aim to commoditise new compliance procedures.
JWG Group CEO, PJ Di Giammarino, had this to say. “Will your chosen client classification method – bilateral, platform-based or ‘know your client’ utility – work for other regulations? CRD IV requires the same classifications as EMIR, but MiFID has a whole different set of classifications, which may soon be changed under MiFID II. Similarly, MiFID regulatory reporting is set to be extended to derivatives. How will this affect your implementation of trade repository reporting under EMIR? Finally, mutual recognition rules are still being drafted in Europe and the US, meaning that the global picture is still very much subject to change.”
With the landscape likely to undergo further reform in the coming years (we are still to see new AML and shadow banking legislation from the European Parliament), it is clear that compliance models will need to be flexible and ready for change. As ever, JWG will keep you updated on all these new reforms every step of the way.