Welcome to Accuity's Trends in Financial Counterparty Due Diligence webinar

Transcription

1 Welcome to Accuity's Trends in Financial Counterparty Due Diligence webinar Jayesh Jagdish Head of Financial Institutions Risk Group, Global Financial Institutions Division - Treasury Axis Bank Ltd Patrick Hinchin Global Director of Product Management Accuity Ryan Lee Business Solution Manager, Payments and FC KYC Accuity 29 September :00 PM SGT

2 KYC Trends in Financial Counterparty Due Diligence Identify, Verify, and Risk Assess Counterparty Relationships Patrick Hinchin Global Director of Product Management Accuity 29 September 2015

3 Key Takeaways KYC is not an option, it is a regulatory requirement The timeliness and accuracy of data is an ongoing issue As Banks move towards automated processes, alternative integration options are required Bankers Almanac has been a trusted source for data for the past 175 years

4 Agenda I. The Importance of Financial Counterparty Know Your Customer (KYC) II. Industry Challenges and Trends III. Consequences of Trends and Challenges IV. The Intergrated Onboarding Approach V. Accuity s Financial Counterparty KYC Portfolio

5 I. The Importance of Financial Counterparty Know Your Customer

6 The Role of Correspondents Exporter/Beneficiary Importer/Applicant 1. Purchase Order 4. Advice of Documentary credit 7. Payment 5. Reimbursement 2. Documentary credit application 6. Reimbursement 3. Documentary credit Confirming Bank Issuing Bank

7 Analysis of Trade Flow Trade within Asia and between North America Europe and Asia was nearly $6 trillion in 2011; 33% of total world trade From Asia To Asia $311 $815 $2,926 From Asia to North America $211 $436 $906 From Asia To Europe $151 $290 $922 From North America to Asia $135 $233 $476 From Europe to Asia $124 $200 $639 Total $932 $1,973 $5,869 Using these growth rates means by 2020 trade flows will top $15.5 trillion

8 II. Industry Challenges and Trends

9 KYC Industry Challenges Macro Drivers The cost of compliance is rising Risk based approach Increase in fines for data inefficiencies and poor management of risk based approach 25% Regulations are driving major overhauls of end-to-end onboarding. Financial institutions are looking to reduce onboarding time by up to 70% 26% % of type of counterparty 49% Staffing levels should reflect the bank s risk level Low Medium High Source: TR Cost of Compliance Report 2015

10 Challenges of KYC Micro Drivers 83% of analysts agree finding accurate information a challenge i 81% of analysts find it difficult to have up-to-date data on existing counterparties 78% agree that they face a lack of data and technology standardisation $ 76% agree that they must overcome rising costs to meet regulatory requirements Accuity Stats from Accuity Customer Survey 2014

11 III. Consequences of Trends and Challenges

12 Derisking Derisking Banks are no longer offering financial services to entire categories of customers that they associate with higher money laundering risk. FinTech is highly affected, but so are correspondent relationships. Regulators state that effective ML risk management should not result in wholesale derisking. Regulators require banks to put in place and maintain policies and procedures to assess and manage ML risk

13 Unbanked Banks Concept of unbanked banks where large banks increasingly withdraw support to smaller regional banks to avoid risks Correspondent banking network is getting smaller So far driven by compliance, but front office has to engage with regulators and understand decisions driven by regulation Risk of money being channelled towards underground illicit means Source:

14 IV. The Integrated Onboarding Approach

15 From Silos to Central Repositories Provider A Counterparty A Provider A Provider B Counterparty A Wealth Management KYC Repository Provider B Counterparty A Retail KYC Repository Retail Wealth Management

16 From Dispersed Data to Single Views A Single Customer View is an aggregated, consistent and holistic representation of data known by an organisation about its customers Advantages Customer single view helps measure and monitor systemic risk by identifying parties involved in financial transactions, quickly and consistently while having an accurate view of their global exposures Improved customer service levels better retention, higher conversion rates, improved overall customer lifetime value, improved communication between traditionally separate teams Considerations Complex User Based Access control systems will be required to ensure sensitive information is only displayed to the right individual in the right team How to apply flags on sensitive information across the whole business so higher levels of EDD are performed How to communicate a central decision on an entity to all other parties who are affected

17 A Scaling and Risk Issue Online solutions such as Bankers Almanac Old KYC Form 1st Counterparty 1st Counterparty

18 A Scaling and Risk Issue Considerations The Siloed model works fine if: 1. You have large teams 2. You have a small number of high risk counterparties 3. You have a book of business mainly made up of lower risk counterparties 4. You do not have duplication of efforts across different silos within the bank 5. You have the capacity to on-board new clients and refresh data of existing without slowing down the business Frequency of review Once every 3 years Every 2 yeaers Once a year 3 months 0% 10% 20% 30% 40% 50% 60% 3 High risk 2 Medium risk 1 Low risk

19 V. Accuity s Financial Counterparty KYC Portfolio

20 KYC Process Through Accuity Solutions Delivery Options: Online or Data File Identify Verify Monitor Bankers Almanac with Due Diligence Repository 1. Prospecting Contact Information 2. Legal Entity Data 1. Legal Entity Data 2. Due Diligence Documents 3. Key Financial Data 4. FATCA 5. Credit Ratings 6. Ownership and Group Structures 7. Country Demographics 1. BA.com alerts 2. Accuity s Data Methodology

21 Bankers Almanac Due Diligence Industry recognised source for crucial KYC Data and Documents 175 years 24,000 Banks, 120,000 NBFIs, 400,000+ documents all regulated banks globally Unique Historical content on counterparties Data and Documents available to all subscribers through a simple process

22 Insights to Trade Based Money Laundering by Jayesh Jagdish, Head of Financial Institutions Risk Group, Axis Bank Ltd

23 Interactive Dialogue Session: Jayesh Jagdish & Patrick Hinchin Moderator: Ryan Lee

24 Q1: How has Financial Counterparty Due Diligence changed over the past 5 years? *Please listen to the audio webinar

25 Q2: From your perspective, what continues to be important for Financial Counterparty Due Diligence teams to focus on during onboarding and KYC review process? And what are the emerging priorities that banks need to focused on in the next few years? *Please listen to the audio webinar

26 Q3: In your view, are the current financial counterparty onboarding and review process and infrastructure in Asian banks ready to support both current and emerging needs? *Please listen to the audio webinar

27 Contacts Jayesh Jagdish Head of Financial Institutions Risk Group, Global Financial Institutions Division - Treasury Axis Bank Ltd E: Jayesh.Jagdish@axisbank.com Patrick Hinchin Global Director of Product Management Accuity E: Patrick.Hinchin@accuity.com Ryan Lee Business Solution Manager, Payments and FC KYC Accuity E: Ryan.Lee@accuity.com

28 Thank you for attending the webinar. 29 September pm, SGT