The risk-based approach to KYC has left it to the individual FSP’s to set their own standards in line with the guidelines but this is incredibly confusing for customers who face one set of requirements from one FSP and totally different requirements from another. This will no doubt be further evidenced with the introduction of SCA (Strong Customer Authentication) where each bank will interpret the guidelines in a different way.
One does question the cost of the compliance to KYC regulations in relation to the benefit. Not for one minute am I suggesting that money laundering and funding of terrorist activities should be condoned but at some point, a study will be done to see whether the benefit in the reduction of both these crimes (probably funded mainly in cash) comes remotely close to the cost that the industry has to bear.
A further cost that has to be accounted for, is the social cost of excluding 40% of the worlds’ population from formal financial services – the unbanked – a large portion of which are a result of the fact that they cannot produce the required paperwork. Typically this is an Identity document that in order to be verified, has to be stored on some sort of independent database that the FSP can access.
It is only with the recent case of digital account opening recounted, that I have ever heard a customer say that opening a bank account was a pleasurable experience.
Lots of work to be done in this space – but critically important.
For more information click here to contact us