A RegTech Answer to Know Your Customer Compliance

Blog entry

Know your Customer (KYC), anti-money laundering (AML) and counter-terrorism financing (CTF) are hot topics in an increasingly hostile world, and were the subject of debate during a panel session at A-Team Group’s RegTech Summit for Capital Markets in London. Panel member Marisol Lopez, regional head of policy and standards at Thomson Reuters, shares her views on RegTech and how it can significantly improve KYC and related processes.

Q: What does RegTech mean to you?

A: Put simply, RegTech is technology made available to help the financial services industry comply with and better manage its regulatory obligations. Increasingly sophisticated and specialised technology applications – or solutions, in Thomson Reuters parlance -- help firms be more compliant, competitive, save costs and be more efficient.

Q: What problems do financial institutions have that you believe you can solve?

A: Firms have to deal with greater reporting requirements and meet higher regulatory standards on a worldwide basis. Compounding this challenge, the regulations can be contradictory from region to region. As a consequence, costs to manage these requirements have increased dramatically, as well as inefficiencies. The strategic use of technology helps firms manage and satisfy regulatory expectations and requirements by adding efficiency to their processes and saving costs with a more holistic approach.

Know Your Customer (KYC) has become more sophisticated and regulations across the board have increased pressure on firms to obtain more information about their clients to tackle anti-money laundering (AML) and counter-terrorism financing (CTF) effectively. Notably, new developments in RegTech have enabled complex regulation and reporting systems, for example, in AML and CTF, and opening client accounts as part of KYC to be streamlined, reducing burdensome costs.

A recent Thomson Reuters report on the cost of compliance, revealed that institutions everywhere are suffering from the increased costs. In a recent survey in Asia, 63% of firms expect the costs of compliance staff to increase over the next 12 months, which translates to billions of dollars internationally. Thomson Reuters KYC Service helps firms to streamline KYC processes and reduce costs.

Q: Why do they have these problems?

A: There has been a significant increase in regulations following the financial crisis and while financial institutions’ customer base has become more sophisticated, this has also exposed firms to greater risk and compliance that have to be managed efficiently.

Q: What regulations are of primary concern to you and your customers?

A: AML/CTF regulations constitute a big challenge for firms. The lack of harmonisation on what standards to apply and different interpretations of the laws and regulations have generated different interpretations of what information is needed to comply with the regulations.

Q: How do you solve this?

A: The main products in demand are for onboarding clients electronically, KYC regulatory compliance and alerts for AML and CTF. Another notable innovation, which does not really fall within the KYC panel’s remit, is automatic reporting of regulatory issues in a financial institution’s compliance ecosystem.

Q: What technology do you use?

A: Our end-to-end client lifecycle management solution, which leverages best-in-class Thomson Reuters data technology and our partner community is a key differentiator. We provide an active compliance engine that monitors the customer base for client compliance with regulatory and internal requirements. And we ensure streamlining of internal processes and drive operational efficiencies through intuitive workflow and rigorous automation.

Q: How do you fit into a financial institution’s architecture and data flows?

A: With Thomson Reuters KYC service, we provide integrated ongoing screening and monitoring to detect changes in our clients’ customers’ KYC profiles, ensuring the data remains accurate and current. We also maintain a robust risk and controls framework that is unique among our peer group in having attained a Type II ISAE 3000 standards, and adherence to other regulator outsourcing guidelines.

Q: What other cool RegTech companies have you seen out there?

A: This Summit’s agenda of speakers and panellists has many such players. We are all in good company!