Archive for the ‘KYC & AML Summit Europe’ Category

Speaker Interview: Clare Rowley

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Clare Rowley, Head of Business Operations, GLEIF

The way we work has been revolutionised by technology. As part of this, the automation of many manual processes has led to considerable time and cost saving. However, despite these changes, many continue to use manual methods when it comes to legal entity identification.

The use of Legal Entity Identifiers (LEIs) as a common identifier to combat this issue has a wide range of business use cases that span multiple industries, business activities and functions. Clare Rowley, Head of Business Operations at the Global Legal Entity Identifier Foundation (GLEIF), talks to us about why current entity verification methods are not enough, and how the solution to the problem – LEIs – can not only help firms meet regulatory requirements, but create business value in multiple sectors.

How do LEIs work?


The LEI is a 20-digit alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). It enables clear and unique identification of legal entities participating in financial transactions by connecting to key reference information. GLEIF makes available the Global LEI Index, which is the only global online source that provides open, standardized and high quality legal entity reference data. Each LEI contains information about an entity’s ownership structure and thus answers the questions of ‘who is who’ and ‘who owns whom’. As of February 2018, more than 1.1 million LEIs have been issued to legal entities globally.

The LEI data pool – which is publicly available – is essentially a global directory that enhances transparency in the marketplace.

Why are current entity verification processes not fit for purpose?


Current processes have significant manual components and often require the use of multiple databases in which a counterparty may be identified by a different name. Many banks and corporations still use names rather than identifiers, resulting in confusion. As an example, a large bank’s client services division recently found that it had an average of five names—with minor variations in its database—for the same organization. Additionally, commonly used databases, different divisions and IT systems within organizations can all have varying versions of the same entity’s name, making it harder to trace and to link information from multiple sources.

Another example of current inefficiencies is in know-your-customer (KYC) processes, where firms work to verify their clients’ identity by conducting robust due diligence. The lack of consistency and clarity within these processes means that banks spend considerable time and resources on what should be a simple task.

Beyond compliance and regulatory requirements, how can LEIs provide business value for companies?


Our recent white paper released with McKinsey & Company and titled ‘The Legal Entity Identifier: The Value of the Unique Counterparty ID’ identifies two broad areas in which the LEI has business value. Firstly, it reduces transactional and operational friction, both within and among organizations. Secondly, you can easily access important information about the background of a legal entity in a specific transaction. Together these benefits help organisations reduce the amount of time spent on identifying counterparties as well as improving information reliability.

How can LEIs create business value for the banking sector?


To give just one example: In capital markets, the LEI’s primary value is derived from reducing the cost of onboarding clients and middle- and back-office activities related to the processing of stocks, bonds and other securities trades. All such activities could be simplified and streamlined if LEI use was more broadly adopted throughout the lifecycle of the client relationship. The use of LEIs in the onboarding and trading phases of the client relationship would also reduce the time spent on data correction and reconciliation necessitated by inconsistent identification of legal entities.

McKinsey estimates that the use of LEIs in capital markets could reduce annual trade processing and onboarding costs by 10 percent. This would lead to a 3.5 percent reduction in overall trade processing and capital markets onboarding costs, amounting to over US$150 million in annual savings for the global investment banking industry alone.

What message do you have for businesses thinking about getting an LEI in the future?


Introducing the LEI into almost any process with a manual component that requires counterparty identification and verification can result in more reliable information, efficient operations, significant cost savings and a reduction in the time it takes to onboard clients. I would actively encourage organisations to consider the adoption of LEIs in their day to day processes.

Speaker Interview: Johannes Hennekeuser

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Johannes Hennekeuser, Head of Digitrans, IMTF

How close is the financial services industry to achieving standardisation in KYC and identity authentication processes?

  • In the area of ID authentication we see considerable progress towards standardisation. In many countries, the practice of video authentication is already accepted by the regulator and has been implemented by many banks
  • Initiatives towards a Digital Identification of every citizen have started in many countries and will ease the use of digital (self-) services; among first movers we see Aadhaar in India, and the SwissID in Switzerland.
  • Regarding KYC, requirements are getting more complex and laborious, making standardisation difficult due to differences among jurisdictions. The opportunities here are around automation. IMTF is able to automate processes and information searches successfully with the help of AI and semantic and linguistic technologies.
  • How can firms continue to deliver on their KYC and AML obligations within an increasingly demanding regulatory framework?

  • Only an agile setup that constantly and easily adapts to changes can cope with these requirements.
  • IMTF has built a modular and comprehensive platform that can easily be configured and deployed to increase the adaptability to changing regulations (IMTF RegTech Platform).
  • Banks are often using a variety of compliance systems that neither interact nor offer services (APIs). The IMTF RegTech Platform includes an integration layer that brings together vendor-specific APIs and file-based interfaces with rule logic and workflows.
  • What are the best ways firms can implement new technology to reduce KYC compliance costs while retaining customer loyalty?

    Banks are facing challenges here on all fronts, but a few new technologies can help to
    improve the end customer experience:

    Process Automation:

  • By automating manual work for screening and alert processing and replacing siloed solutions with an end2end vision regarding compliance and risk, your teams and systems can be aligned with your regulatory objectives.
  • Data remediation:

  • Create structured, usable data out of your existing low-quality, and unstructured information spread across multiple systems and documents based on an adequate Business Object model.
  • People:

  • Align, educate and equip staff to handle top-priority tasks where human expertise and decision-making is needed. Technologies such as collaboration tools and adaptive case managers help to ultimately improve the accuracy and efficiency of your people.
  • How can firms turn the compliance burden into competitive advantages?

  • While regulators force banks to increase documentation and background research, the additional data collected can also be used to enhance the customer experience and extend product sales.
  • In the IMTF RegTech Platform, we use advanced profiling to both improve fraud detection capabilities and allow a bank to learn more about its customers.
  • With ICOS/2 it’s possible to do segmentation and peer group comparisons, making it easy to target processes, actual customer requirements and identify opportunities for additional product offerings.
  • A fully digitalized onboarding process with self-service features ultimately improves the bank’s image and reputation.
  • How can firms most effectively limit client impact when complying with the KYC refresh process?

  • Banks are required to collect more data and do background checks, so theoretically this would require additional customer questions and documentation. But, by using certain automation technologies, many of these steps can intelligently be done in the background with little customer impact.
  • IMTF offers a Semantic Search feature that is initiated automatically once an enhanced due diligence is required. Seconds later, it delivers targeted content from commercial lists and the web with guaranteed accuracy and compliance, enabled for use anywhere.
  • Case Managers are extremely flexible and support both routine processes and ad-hoc activities. BPM systems don’t have the flexibility to break out of the pre-defined flows and need to run the customer through multiple loops, but our Case Manager allows you to adapt on the fly while also fulfilling regulatory requirements.
  • Why will you be speaking at Finance Edge’s KYC & AML Summit?


    We are excited to participate in lively discussions on what it takes to “reinvent and support” processes from identity authentication to KYC automation and enhanced due diligence. As a RegTech pioneer with 30 years in the market, we will be sharing our best practices for Client Lifecycle Management, KYC/EDD, and AML.

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