Posts Tagged ‘Onboarding’

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.

    Speaker Interview: Abe Smith

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    Abe Smith, Founder & CEO, Dealflo

    What is Dealflo’s role in helping financial services companies with the KYC process?

    Dealflo’s cloud-based solution allows financial services companies to fully digitise the transaction of customer agreements that carry risk, such as finance agreements, loans, mortgages, and life and pensions agreements.

    Dealflo’s technology helps financial services companies move from manual or semi-manual onboarding processes to fully automated processes, where a customer’s identity is verified digitally, and agreements are signed electronically. Agreements which are signed electronically require stronger evidence to confirm a person’s identity than would be required if an agreement was signed face-to-face. We give our clients access to various KYC methods to help them balance the need to provide a great customer experience, with the need to mitigate risk.

    How can firms continue to deliver on their KYC and AML obligations within an increasingly demanding regulatory framework?

    Looking at KYC in the context of a completely digital onboarding process, there’s a delta between the minimum you need to be compliant with regulations and what is advisable as best practice. Dealflo help enable our clients to be on the right side of that delta, whilst offering a frictionless experience to their customers. Financial services companies should be looking for KYC processes that assist with compliance and mitigate risk robustly.

    What are the best ways firms can implement new technology to reduce KYC compliance costs while retaining customer loyalty?

    There are a multiplicity of KYC and AML vendors out there, with fantastic technology that can help financial services companies reduce KYC compliance costs and retain customer loyalty. However, the problem many financial services face, is that they do not have the bandwidth or desire to do multiple integrations with multiple providers of KYC services. My advice to financial services companies would be to look for a flexible solution that offers access to multiple KYC methods, so that they can pick and choose KYC methods which are most appropriate for particular processes or products. This will enable them to optimise not just for cost, but risk and customer experience factors too.

    Dealflo has sourced leading technology to address the wide-ranging needs of financial services providers. This enables us to give clients access to the widest array of global identity and verification checks available, all through a single integration, single contract and single API. Dealflo’s clients can pick and choose the best identity checks for them – such as credit reference agency checks, or innovative new KYC methods such as automated document verification, biometrics, facial recognition, IP geolocation or mobile device identity.

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

    The industry is nowhere near a standardisation, nor should it be. Each financial transaction is different and carries a different amount of risk. When you consider factors such as the value of an agreement, the profile of the customer, the method by which the agreement is signed, the extent to which the product/service is regulated, and many more, you soon realise that there is no appropriate ‘one size fits all’ KYC method.

    The goal shouldn’t be a standardisation – it should be to create a flexible and configurable service that can accommodate all these variations and deliver the most appropriate KYC method for each. A ‘platform as a service’ approach allows financial services companies to achieve this.

    Why will you be speaking at Finance Edge’s KYC & AML Summit, and what are you most looking forward to at the event?

    KYC & AML have historically been considered as isolated compliance requirements to ‘get done’, instead of integral steps in a financial transaction. We want attendees to view KYC and AML as steps which produce evidence which is essential to establishing the veracity of an agreement. If identity evidence is integrated into a tamper-proof signed agreement, then that agreement is much stronger if challenged.

    We are attending the KYC & AML Summit to discuss these processes in the broader context of digital onboarding and to help spark new discussion to think about KYC and AML differently. I’m looking forward to discussing and establishing the role of KYC & AML in customer onboarding and seeing where the industry is headed next.


    KYC & AML Summit
    7 March 2018 London

    Abe Smith will be join us during the KYC & AML Summit. This high-level and interactive forum, will bring together senior-level professionals from all corners of the kyc & aml space.
    Contact us to secure your place

    Who can see your data? ☠

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    You’ve seen it: high-profile hacks have taken over the news. There’s so much that can be done with data gathered through KYC compliance, but you’re always looking at that dreaded data breach.

    We’ve asked our AML experts for their input on the best ways to prevent any sneak-peaks on client and company information:

    • Decentralise your data – Determine who needs access to what, and enforce it. Don’t give fraudsters an easy grab.
    • Give your clients control of their own information – If they can decide what to do with their information, you won’t be risking open access to any data lakes (or swamps!)
    • Move towards a real-time transaction monitoring model – Catch fraudulent transactions while they happen. Build this into your long-term strategy to stop them before they can disappear.

    None of these will be a one-size-fits-all strategy, but these are all important steps to take in building out your defences.

    If you want to help shape fraud prevention and data privacy strategies, join us at the KYC & AML Summit on 7 March in London. This event will bring top FS executives together to discuss how they are overcoming their biggest AML challenges today.

    Visit the website | See speakers confirmed

    Super Early Bird! Book by 22 December to pay only £599*

    Contact our customer service team on +44 (0)20 3397 7458 or email us on info@eventcreationetwork.com

    Speaker interview: Eavan Garvey

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    Eavan Garvey, Head of Group Conduct Risk, Bank of Ireland.

    How is the work to improve conduct and culture impacting financial services firms?

    Reduced cost from conduct risk that has crystallised. The cost of conduct issues is significant; while the actual amount of remediation and the enforcement penalties are likely to account for the bulk of costs, other costs such as staff, printing, postage, buildings, etc can also be considerable.

    Customer retention. Where a firm has values that place the customer at the core, and where these values can be seen in everything the firm does from the development of new products, to how the products are advertised and the managing of complaints, thus demonstrating that the firm has the customer truly at its heart, the customer is more likely to have an increased confidence in the firm and is more likely to stay with the firm and avail of additional products or services provided by the firm.

    Positive reputational impact. Where the firm’s strategy is clear and where it can easily be seen how it fully aligns with the firm’s approach to customer outcomes. In addition to customers being more likely to stay, the firm has an improved relationship with third parties including regulators, policy makers, media, etc increases market confidence.

    Simplified product proposition. A truly customer centric firm will support a product proposition that is less complex, easier to understand, with terms that are not designed to create cumbersome conditions that are difficult to understand. Such a firm will also have systems that are likely to support the proper maintenance and servicing of products, and will instill confidence in the market as any likelihood of remediation is reduced or removed.

    Less complaints/errors. A firm is likely to have a reduced volume of complaints where conduct risk has been fully embedded. Similarly, where a firm is fully focused on embedding good conduct outcomes, the number of complaints being escalated to the ombudsman are likely to be reduced as the complaint outcome will be fully focused on what is in the best interest for the customer. Consequently, reputational risk will be reduced.

    Staff are more likely to be engaged as products are simpler to understand, easier to explain to customers, processes are less complicated and driven primarily by systems rather than manual intervention. Customers are happier with the product proposition and service, and are less likely to complain.

    Sustainable long term solutions. The firm’s strategy is more sustainable as it is focused on embedding long term sustainable solutions. Regulators are keen to understand that a firm’s strategic plans are fully aligned to customer values, thus ensuring that the strategy is more sustainable.

     

    What are the best ways to encourage staff to engage with the conduct agenda in their day-to-day activities?

    In addition to consumer protection, conduct risk can be described as a focus on the corporate culture and the ethical behaviour of employees and management in a firm. To successfully embed an ethical culture across a firm, conduct risk culture must first be supported and implemented by senior management and board members. Regulators have regularly linked the competence and ability of staff to some of the well-known remediation issues. Regulators are looking to firms to evidence the link between appropriate culture, adequate training and managing the risks that a firm’s particular business model represents.

    Training is a critically important element of the conduct risk framework. If staff do not understand what or how to embed good customer outcomes, in addition to why it is important to maintain the integrity of the market, behaviours will never change. With this in mind, and as training is particularly important, it is critical that this is right from the outset. Training should consider how to develop staff behaviours in addition to providing technical knowledge in relation to the various components of the conduct risk framework, in particular the conduct risk policies.


    What are the keys to delivering high quality products and services, and a great user experience, while maintaining a robust conduct agenda?

    “Provider firms will be expected to have robust procedures to assess their target market, perform adequate stress testing, and manage the product risks for consumers. We would expect the sorts of standards that consumers associate with basic vehicle safety or over‑the-counter medicines, for example, to be the norm for widely sold financial products. Firms should also consider making their own pre‑approval processes more transparent; the aim should be to increase the level of trust consumers have in financial products.” Martin Wheatley – Journey to the FCA

    When developing products firms should consider:

    • whether the product can meet customer needs
    • whether there are any unfair terms
    • whether documentation detailing the product is clear and easy to understand
    • whether the product is overly complex
    • who should be the target market
    • marketing and advertisements must describe the product or service in a clear, fair and not misleading way, to help the customer avoid poor purchase decisions

     

    How is the ever-increasing level of digitisation impacting conduct risk management?

    Regulators encourage innovation in the best interests of consumers. In particular, technology and product innovation can enhance competition and customer choice. There is however a need to focus on fair consumer outcomes, for example when considering provision of financial advice through on-line channels. Where firms are moving more to providing financial advice and recommendations through on-line channels they must ensure that the necessary protections are in place to deliver the right consumer outcomes. Firms must consider the following:

    • The appropriateness of selling all products online and whether certain more complex products should only be sold with an advisor.
    • How customers including more vulnerable customers are not financially excluded where the overall strategy is to move towards online platforms.
    • Consumers tend to focus on headline information when buying online, firms must ensure key information in relation to the features and risks is available and displayed in a manner easily identifiable and understood to all customers. Regulators refer to the ‘Framing’ effect which describes how different consumer choices can be made depending on how information is set out. Firms can present the same information in different ways and this can lead to different choices by consumers. For example, certain pieces of information may be more prominent on a web site then others resulting in certain biases being prompted. Firms can benefit from ‘framing’ where they have deliberately created complicated pricing structures, where key information is masked by including some irrelevant information or where the information can induce an emotional response.
    • Whether robust systems are in place to deliver a reliable service to customers. While technology does and will continue in the future to form a part of many firms’ growth and development strategies, firms will become more vulnerable due to dependencies on underlying systems, and the substantive operational risk this can cause. An over reliance on technology-based infrastructures can create additional risks from systems used outside financial markets such as mobile phone providers.

     

    What are the most powerful ways that firms can improve their conduct agendas (getting buy-in from staff / improving systems and processes / developing better risk models, etc.)?

    To improve the conduct agenda, it is critically important that firms get buy in from the board and staff. The firms board and senior management can be comfortable that the conduct risk strategy is robust and sustainable and that there are benefits to the firm:

    • from a business sense – it makes good business as the business model becomes sustainable with little customer complaints reduced cost as a result of less crystallised conduct risk, this is obviously a benefit to the firm as well as its shareholders;
    • from a moral and ethical sense – that firms do things because they should, not simply because they can.

    Why will you be speaking at ECN’s Conduct Risk Summit, and what do you hope to get out of the event?

    This is an area that I am hugely passionate about. I really believe that when firms are truly customer centric they will reap rewards not only in the context of customer satisfaction, but also in the behaviours and values espoused by staff and senior management across the firm. I believe this message and the meaning of conduct risk has been overly complicated over the last number of years, and I would like to show this is not such a complex risk, and that measures can be easily implemented to reduce the crystallisation of conduct risk issues.

    Speaker interview: Imtiaz Hussain

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    Imtiaz Hussain, Head of Audit UK, Ireland, BNY Mellon.

    How is the work to improve conduct and culture impacting financial services firms?

    Doing what’s right has always been the expectation for financial institutions. The recent financial crisis reminded us that not all of us were doing right by our customers and other stakeholders, and poor conduct in financial services was blamed. The renewed focus on culture and conduct now means firms have to embed conduct risk in their existing risk management framework. Firms that seek to extract value out of conduct risk management are defining conduct risk strategy, establishing conduct risk appetite and developing appropriate metrics to ensure that conduct agenda is considered throughout the customer lifecycle. Equally, the board and senior management are becoming more vocal on the conduct topic and setting the tone for right conduct, culture and behaviour. In the UK, the Senior Managers Regime further heightened the urgency to ensure conduct risk management permeates throughout financial services institutions.

    What are the best ways to encourage staff to engage with the conduct agenda in their day-to-day activities?

    Setting the tone from the top is key, as employees can look up to set of values and behaviours expected from top management. Also, a safe environment for people to speak up and voice concerns, and even rewarding such behaviours, encourage proactive management of conduct risk. All employees should be encouraged to embrace and demonstrate the concept of good customer outcome. One way to make this concept go viral in an organisation is story telling. It is through story telling that employees can contextualise what good and bad look like.

    What are the keys to delivering high quality products and services, and a great user experience, while maintaining a robust conduct agenda?

    Delivering better client experience and conduct risk management complement each other. As I mentioned previously, the key to delighting customers and giving them better experiences is to put the customer at the centre of what firms do. From product development to marketing and selling, and then servicing clients, employees should be able to identify conduct risk in the value chain and mitigate any risks associated with conduct.

    How is the ever-increasing level of digitisation impacting conduct risk management?

    Digitisation is driving change in the financial services business model, but it is also changing customer behavior and transforming customer experience. Digitisation certainly has an impact on a firm’s conduct risk profile and it is vital for organisations to manage the risks associated with this impact. This is precisely the reason why a firm should strive to establish a robust and resilient conduct risk management framework that is understood and bought in by staff at all levels.

    What are the most powerful ways that firms can improve their conduct agendas?

    For me, the two most powerful catalysts for improving the conduct risk agenda are first story telling (so people at all levels understand and live and breathe the conduct agenda), and second empowering them with tools and methods for better management of conduct risk. These include training staff regularly on conduct, establishing a robust conduct risk management framework, and encouraging conduct risk dialogue by incorporating the conduct agenda into existing policies and procedures, etc. It is important to recognise that, whilst setting tone at the top is vital, tone in the middle and tone at the bottom is absolutely critical for bringing the conduct agenda to life. Embedding conduct risk management will require everybody in the firm.

    Speaker interview: Heidi Mosbek

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    Heidi Mosbek, Head of Group Business & Technical Audit, Generali

    How is the work to improve conduct and culture impacting financial services firms?

    As in any strategic decision, there is an upfront investment to develop and embed a strong, mature and prudent conduct or compliance culture in a business. If we think about improving risk and compliance culture in a business that used to view risks as something owned and managed in the Risk, Compliance or Audit Functions, a change in that view and operation will be perceived as challenging. Employees and management will be expected to establish a stronger control environment in the business lines, and take effective measures to mitigate identified risks to the business, working closely with the control functions. The control functions also need to improve their understanding of the business and learn to speak the same language – or to translate “risk phases” to explain what can go wrong, or how this issue can harm the business or customers.

    What are the best ways to encourage staff to engage with the conduct agenda in their day-to-day activities?

    A clear tone at the top needs to clearly express “why” we want our staff to change and “what” the expectations are of leaders’ and employees’ behaviours and achievements. It is key that the benefits are explained, e.g. that improving conduct and the effective management of risks is not solely to meet the requirements of the control functions, but that it is a tool to make the business strong and sound, to the benefit of customers and shareholders.

    What are the most powerful ways that firms can improve their conduct?

    It is important to involve the people who actually work in the specific areas that need to be improved. A pure top down approach with limited possibility to have a say and impact on changes in processes and routines can potentially lead to disengagement and less effective actions. Involve day-to-day operations, and empower people to identify gaps, suggest simple solutions and take actions.

    Why will you be speaking at ECN’s Conduct Risk Summit, and what do you hope to get out of the event?

    I look forward to meeting a lot of people, who will each bring a different background and experience; and to discussing and sharing views on topics relevant to a day to day operation.

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