Financial institutions around the world not only prioritise financial inclusion and financial transparency, but also share the desire to increase data sharing and collaboration with their peers to achieve it, according to a new study by LexisNexis® Risk Solutions, a global big data, technology and analytic linking company.
The global Financial Inclusion and Transparency Survey, which targeted 300 senior-level professionals in the financial services sector with Anti-Money Laundering (AML) Compliance responsibilities, revealed worldwide consensus around the benefits of a global utility. Nearly all respondents (99%) agree that a global customer due diligence utility would help protect an institution’s reputation, reduce compliance cost, support greater efficiency and provide better data to transform the way companies make decisions.
Nearly 8 out of 10 respondents (79%) agreed they would be willing to collaborate with their peers to streamline onboarding, KYC activity and watch-list processing, and a similar number (78%) stated that they would be willing to share data to see such improvements. The same proportion (78%) felt that the benefits would outweigh the costs if they could be part of a shared service to efficiently obtain, manage and utilise due diligence collected from common customers.
These findings highlight the fact that banks across the world not only share the challenge of managing the increasing compliance cost, but also risk losing consumer and business deals as a result of new customer onboarding deficiencies. Despite the survey finding that 77% of financial institutions consider providing financial services to the unbanked and under-banked very important, roughly half turn away between 6% and 15% of potential individual customers (50%) and small business customers (48%) due to their current KYC or credit risk management processes. More than 40% of respondents cited the cost of collecting information as a top concern.
Whilst every financial centre surveyed agreed that their onboarding processes are important for both compliance and better understanding their customers, the UK, however, is the only country where respondents saw onboarding as yielding true insights more so than as just a compliance activity.
The results showed that financial institutions across the globe share the view that financial transparency makes it more difficult to hide illicit transactions (83%), and is a priority for company Boards of Directors (85%). The study also found that providing internal stakeholders with the information they need to make compliance risk and credit decisions about consumers quickly is seen as a critical role of compliance functions (87%).
Dean Curtis, Managing Director, LexisNexis® Risk Solutions UK said:
“The fight to combat money laundering, terrorist financing and tax evasion has intensified in the last year. The Treasury is the latest body implementing new international anti-money laundering and counter-terrorist financing regulations into UK law, as the regulatory requirements increase year-on-year. As such, more is expected of the financial services industry to protect society and prevent the issues in question.
“Fundamentally, there is a growing need for greater collaboration between financial institutions around the world. As our survey highlights, it is clear that improving the KYC process will make such collaboration more efficient and effective. We have seen British banks move towards centralising information held across the industry. Coupling this approach with standardising the collection of data across the industry, real efficiencies will be realised in the financial sector.”