Regulation

Effective management and processes remain key to complying with KYC regulation

Change leaders often cite the prohibitive cost of regulation as a barrier to investment, given that it has a subsequent impact on other parts of the change portfolio. Both upcoming and historic regulation continue to be an issue for the banking industry, requiring banks to commit resource and budget so that they remain compliant with the demands of the regulators.

As technological innovation shapes the financial world, the speed and scope of regulatory change will only increase in order to respond to rapid market changes. Alongside this, banks are required to remain compliant with existing regulation which is also constantly evolving. This inevitably places greater pressure on banks investment budgets as they struggle with extended, refocused or entirely new regulation.

We know that historic regulation still requires a significant portion of banks budgets, which we saw in this year’s Change Perspective. In our survey of the UK’s leading financial institutions,KYC and AML activity was planned by more than half (58.3%) of all banks, with 40% of institutions planning for ‘significant activity’ in this area.

As Anti-Money Laundering Regulations are constantly revised, just one in five (21.7%) institutions stated that they were compliant with their KYC / AML requirements. This is evidence of the difficulty that organisations are experiencing with keeping up with KYC and AML regulatory demands and, ultimately, achieving full compliance.

As the subject of ongoing focus by regulators, KYC and AML carries eye-watering fines and investigation costs to ensure compliance. There is also a need to remediate historic client information, often as a result of AML breaches. However, as the global financial system becomes more integrated we would expect to see more examples come to light of individual organisations controls failing.

Though we expect new and existing technology to help ease the burden on organisations, the scope and severity of KYC regulation necessitates an effective and sophisticated programme. This programme must be built upon robust processes and protocols, with the capability to respond at scale across an organisation and ensure a timely and accurate completion of activity.

It is this balancing act between process and the deployment of resource that holds the key challenge for change leaders. And whilst technology may alleviate some of the stresses, it does not offer all of the answers for our financial institutions. Instead, it will be effective management of these moving parts that will remain the real key to success, with no apparent slowdown in the investment that KYC and AML requires on the horizon.

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