Integrating KYC Processes within your TRMS

by Lucido Group

As the frequency of money laundering scandals increases, the overhead of maintaining KYC compliance is overwhelming operational staff. Integrating KYC processes with your Treasury Risk Management System (TRMS) can have many benefits.

The Many Saints of Newark (and Everywhere Else)

Barely a week goes by without another report of a bank being hit by an Anti-Money Laundering (AML) scandal. In the UK, NatWest and HSBC are back in the news while, in the Netherlands, Rabobank are investing €249m in new AML controls after threats from the central bank. Corporates are not immune as some of the burden inevitably falls to them with more stringent Know Your Customer (KYC) requirements.

There is a range of AML and KYC screening software available in the market, including from some big names like Refinitiv, Oracle and Dow Jones. The value-add for many would be integrating KYC processes within your TRMS; effectively enforcing checks at deal capture and keeping a full audit trail from start to finish for both their deals and counterparties.

In this paper, we discuss: the challenges of KYC; the advantages or integrating those processes within your TRMS; what clients should consider when making that jump; and a case study of a prior implementation with World-Check from Refinitiv.

The Wolf of Wall Street

AML is the catch all for all actions banks and corporates have to take to ensure that their customers are not involved in money laundering or fraud. This includes preventing your company being used for criminal or terrorism-related activities. KYC is a subset of AML and covers all due diligence undertaken in finding out who your customers are. It is used to decide whether you should be doing business with this customer by:

  • Verifying the customer’s identity to prevent fraud;
  • Checking against a prohibited customer list;
  • Assessing the customer’s risk profile; and
  • Monitoring changes to risk profiles on an ongoing basis.

The Road to Perdition

There are a number of steps to effective KYC and many are time consuming, with effort spent on: gathering key company information; determining the ownership structure; and identifying the ultimate beneficiaries and any other individuals associated with the company.

This needs to be supported by a wider compliance program that covers the ongoing monitoring, reporting suspicious activity, and keeping documented policies and auditable records.

There are also data protection considerations to having individual information such as name, date of birth, nationality, etc. as part of your KYC processes saved inside your organisation’s network. The General Data Protection Regulation (GDPR) adds requirements around securing personal data. Hold KYC records in Excel spreadsheets, which employees can misplace (lost USB stick or laptop, email outside the organisation, etc.), and you run the risk of a breach and potential fine. Leveraging a standard KYC solution such as World-Check has the advantage of keeping sensitive data outside your infrastructure. Using a specialist screening platform helps comply with auditing requirements and significantly lowers the risk of data protection breaches.

Lock, Stock and Two Smoking Barrels

If you have, or plan to use, a screening platform, you should consider integrating KYC processes lock, stock and barrel into your TRMS. This enables front-to-back compliance and maintains full audit trail of both the counterparties screening process and deals booked against them.

An implementation should, at a minimum, address the following areas:

  • Manage the creation of new counterparties through the screening process;
  • The status of existing counterparties should be updated as they change on the screening platform;
  • Dealers should be warned or blocked when booking deals with counterparties that did not pass screening requirements;
  • Screening details should be readily available in the system for users to see; and
  • Historical data should be maintained for audit purposes, with adequate reporting look back at counterparties’ historic screening status.

For clients with global locations, processes may require adjustment on a per-region basis (e.g. regional offices using different screening platforms). In an ideal world, the implementation of the process should be screening platform agnostic. Migration and onboarding of users is also important to the success of the implementation and should be carefully planned.

The Place Beyond the Pines

One of our Ion Openlink clients has just finished integrating World-Check KYC processes with Findur. Refinitiv has an extensive web-services API that allowed for easy integration. Paired with Openlink’s flexible OpenJVS API (no additional license was required), the implementation was able to meet all the client’s key requirements.

In that client’s case, the KYC team was involved from inception. It was responsible for creating new counterparties, screening them, and assessing their status in Refinitiv. The process is completely transparent and driven from Findur; the interface automatically screens new counterparties on creation and downloads the results. Results are reviewed for changes on a regular basis to ensure the latest data is available in the system.

When booking deals, users are warned/blocked if using a restricted or sanctioned counterparty. Bespoke screens were developed for users to view the screening status of all the deals/counterparties, and data is stored inside tables that maintain the complete audit trail of the screening workflow.

The result is a reduction in time to onboard new customers, control over the use of sanctioned counterparties, thorough tracking and reporting, and an overall improved user experience.

Whether you are already using a screening platform and interested in integrating KYC processes to your TRMS, or are currently selecting one, we can help: reach out!