Frequently asked questions on KYC for financial institutions, from client onboarding to ongoing maintenance.
Know Your Customer (KYC) is a mandatory process for financial institutions to identify and verify a client’s identity and sources of funds. It is conducted during new client onboarding and periodically throughout the lifecycle of the client in accordance with the client risk profile e.g. clients can be risk assessed as high, medium or low risk, with high risk clients reviewed every year, and medium and low risk clients reviewed typically every two-to-three and three-to-five years respectively.
Why is KYC so important?
El proceso del KYC protege a las instituciones financieras y al sistema financiero completo de delitos financieros, p. ej., blanqueo de capitales, terrorismo financiero y otras actividades ilegales.
The KYC process is heavily dependent on client information. Clients must prove they are who they say they are and that their sources of funds are legitimate. They need to prove their identity and produce documents verifying the legitimacy of their information and onboarding application.
Financial institutions may refuse to open an account or may cease an existing relationship with a client if the client fails to meet KYC requirements.
There are 3 key challenges of conducting Know Your Customer.
For more information, read our blog on the Top Trends for the Future of KYC.
KYC reviews are incredibly time-consuming for financial institutions – especially for complex clients such as institutional, commercial or business clients.
Fenergo’s KYC Trends in 2022 research shows that a single client review can take up to 60 days for 40% of corporate banks to complete and up to 150 days for one-fifth of banks, with 8% taking up to 210 days.
The ongoing KYC review process for financial institutions accounts for a significant percentage of their compliance budgets. According to Fenergo’s KYC Trends in 2022 report, two-thirds of survey respondents said an average KYC review costs between $1,501 and $3,500. For banks that onboard tens of thousands of clients every year, this can easily add up to millions of dollars per annum.
In fact, almost one-third of financial institutions surveyed claim they spend between 31-40% of their total compliance budget on KYC, with one-fifth of firms spending even more - between 41%-50% of the compliance budget on KYC.
Compliance teams are under pressure to collect an ever-increasing volume of KYC information on one hand and decrease onboarding times on the other.
This global research report by Fenergo investigates the direct and opportunity costs of allocating huge resources to KYC functions.
Proactive Approaches In Discussion With Finextra TV At Sibos. Stella Fau Clarke discusses why KYC compliance has never been more challenging.
Póngase en contacto con nosotros y concertaremos una cita con uno de nuestros expertos en KYC para que le muestre cómo el KYC de Fenergo puede transformar sus operaciones de cumplimiento.