Over two-thirds of financial institutions are losing out on business due to inefficient Know Your Customer processes, research by LexisNexis® Risk Solutions shows
- 54% of professionals in large financial institutions state that there are inefficiencies in their current Know Your Customer (KYC) and Sanctions alert remediation processes
- Over two-thirds (70%) of those with less efficient processes cited missing out on business due to customers being flagged erroneously as a financial crime risk
Financial institutions need to improve the efficiency of their KYC and sanctions remediation processes or risk losing business, the latest report published today by LexisNexis® Risk Solutions reveals. 70% of professionals in financial institutions are worried that customer friction caused by inefficiencies in these practices are resulting in lost business. KYC and remediation procedures are in place to investigate whether a new or existing customer flagged as a potential financial crime or sanctions threat, poses a genuine risk. Industry feedback indicates that common reasons which result in institutions losing business due to inefficiencies include:
- Customers frustrated with delays or repeated requests for information opt to take their business elsewhere;
- Institutions rejecting potential customers who have been erroneously flagged as a financial crime risk.
The report, KYC & Sanctions Remediation: The Impact of Inefficiency, interviewed 151 decision-makers responsible for KYC and sanctions alert remediation in UK financial institutions (including banks and investment firms), to identify both the root causes and business impact of inefficient financial crime compliance processes.
Financial institutions are challenged with balancing the needs of the business and customers with financial crime compliance obligations, which can often cause friction. Over half (59%) of the decision makers surveyed stated that their current KYC and sanctions remediation processes are less than very efficient (63% of small-mid sized firms and 54% of large firms*), which has a subsequent negative impact on their organisation.
The biggest factor impacting process efficiency was found to be disparate and siloed data systems, with 60% of those with less efficient processes citing this as a key concern. The next two most common factors were the lack of a single risk view for customers and prospects, and the time required to maintain an audit trail, both cited by 59% of respondents.
The consequential business impacts varied from internal friction between departments and decreased productivity, to loss of business. Notably, over two-thirds of professionals from banks (67%) with processes which needed improvement, pointed to losing business due to inefficiencies in remediation practices, with 50% of investment firms flagging the same issue.
Michael Harris, Director, Financial Crime Compliance, at LexisNexis® Risk Solutions says:
“Inefficiencies in Know Your Customer and sanctions remediation processes can result in a huge cost for financial institutions, due to the negative effect they can have on business operations. This cost can be both reputational and financial.
“Significantly, disparate data and a lack of a single risk view were flagged as two of the major causes of inefficiencies, highlighting how important having access to the right combination of information and technology is when conducting remediation activities.
“Fully efficient remediation requires a holistic view of the customer or prospect. Only when financial crime compliance teams have access to the full picture are they able to make the robust and timely decisions required to expedite remediation activities, meet compliance obligations, maintain the customer experience, and of course, combat financial crime effectively.”
BUSINESS3 days ago
Philanthropy Is an Underrated Tool for Growing Financial Services Businesses
TECHNOLOGY3 days ago
Investment in mental health amongst cybersecurity professionals set to increase according to Infosecurity Europe poll
NEWS2 days ago
Bank shares rise after Credit Suisse rescue eases crisis
TECHNOLOGY2 days ago
Scratched EV battery? Your insurer may have to junk the whole car