There are two aspects of KYC (Know Your Client or Customer). There’s the important, regulatory requirement to identify who you’re dealing with, and then there’s the reality of really knowing your client, understanding their business and making informed decisions based on that understanding.
Too often, the first process is overly onerous while the second gets overlooked.
That shouldn’t be the case.
Why do we need KYC?
The amount of money laundered globally each year (between $800 billion and $2 trillion) would cover the wage bill for the entire UK workforce. That’s a staggering sum of money that originates as the proceeds of crime: drug trafficking, people trafficking, corruption, extortion and fraud.
I qualified as a barrister and solicitor in the UK. I’ve worked in criminal defence and for the Crown Prosecution Service (CPS) in its Organised Crime Unit, tracing criminal proceeds. I joined the enforcement department of the Financial Services Authority at the height of the financial crisis, investigating wholesale investment banks and approved persons for misconduct. From there, I moved into supervision, designing and implementing the supervisory approach under the UK’s new “twin peaks” regime, now known as the Financial Conduct Authority and Prudential Regulation Authority.
As a result, I’ve seen the scale and the consequences of financial crime and the failure of firms in preventing their businesses and clients from being misused for financial crime. As we have seen recently, such a failure can create costly disruption to a firm’s clients. So, I have sympathy with the goals of anti-money laundering regulations like KYC because they exist to protect the interests of people and companies who place their faith and money in financial institutions to help manage their affairs.
It’s important for the integrity of the entire banking system that efforts are taken to understand where and from whom money originates as it enters the legitimate financial system. Banks, lawyers and accountants, and institutions like Centtrip (an FCA-regulated electronic money institution) are all required to implement robust KYC processes in order to validate their customers and help protect the wider financial system.
If you are a new customer of any one of these organisations, you’ll be familiar with the process of presenting documents and answering seemingly intrusive questions about your business. There’s no avoiding it. Every country in the developed world applies very similar rules.
The question is: would you feel comfortable placing your money with an institution that didn’t ask those questions?
But, KYC isn’t just about denying the bad guys and irritating the good guys. KYC helps keep your money secure. It makes it harder for others to misuse your personal information for illegal purposes. At Centtrip, we believe that by prioritising our anti-money laundering infrastructure, our clients feel safe and secure because their interests are protected at all times. A thorough KYC process should give you confidence that the institution pays attention to important safeguards and, of course, KYC supports the broader societal good of reducing crime and ensuring more money is legitimately accounted for.
Beyond the tick-box
Technologies like artificial intelligence and biometrics have the potential to alleviate some of the compliance burden on individuals, but currently there are shortcomings. Systems can be overly simplistic, tick-box exercises that lead to automated, algorithmic responses: “the computer says no”.
At Centtrip, we prefer a hybrid approach, using digital where it contributes but leaving space for experienced, human, “analogue” judgement, that is sensitive to our clients’ specific markets and activity patterns.
The result is a system that, while governed by the same rules and to the same standards as other regulated electronic money institutions (EMIs), can be more nuanced, better recognising the unique characteristics of our niche markets.
Our financial crime compliance team consists of experts who deeply understand our clients’ niche sectors. From the outset, we invest time in understanding clients’ unique businesses within those sectors so that expertise can inform our decision-making.
As a consequence, we have a process that is less burdensome to the customer and of greater value to the business. We don’t waste time, resources and patience on scenarios that, while unusual for the world on average, are perfectly quotidian to touring musicians or superyacht operators.
KYC goes beyond onboarding. It’s an ongoing process that ensures individuals haven’t been compromised. We monitor lists of politically exposed persons (PEPs) and sanctioned individuals and we monitor individual transactions.
We take a personal approach here, too. Rather than simply blocking transactions that are outside an established pattern of behaviour, we might phone the client asking if everything’s okay. We know our clients, we know their business. Why wouldn’t you just talk to them?
What sets Centtrip apart?
I’m very proud of our processes at Centtrip. For a company of our age and size, we have a pretty sophisticated approach that’s better than many. Why is that?
Certainly, we benefit by being nimble enough to adapt and change. As a fintech, we’re not shackled to costly, legacy technology. Our platform architecture makes it easy to adopt the best new tools as they come along, working collaboratively with partners to deliver the best experience for the client.
We also have the benefit of experience. Our leadership team have been in different areas of the industry for many years. They’re not wide-eyed.
Centtrip was designed for high-spending, internationally mobile teams who require security, confidence and personal service. Quite simply, our clients expect and demand a KYC process that’s above average.
And, that brings us back to our hybrid, human/digital approach. Our efforts to develop deep understanding of our customers are vital to our success.
It benefits both client and business to emphasise the K in KYC.