Are you KYC registered yet

There are lots of banks in the world, and they all have to work together to make the financial system function. With 1.3 million bilateral correspondent banking relationships, that is a lot of connections to keep track of.

But of course correspondent banks do more than just correspond with each other. There are increasing regulatory obligations to perform due diligence on counterparties. These requirements have become much more stringent and complex over the past few years.

This has become an issue for most banks. KYC on peers has grown to be a major share of the overall compliance effort. And while no one doubts its importance, it is very repetitive and redundant work, involving the review of large numbers of documents and the collecting of very similar types of data from large numbers of counterparties, over and over again.

Such processes cry out for standardization. The good news is that the industry has responded.

From the original Banker’s Almanac project based on the Wolfsberg Principles for Correspondent banking as a first try to collect and provide information on banks for other banks, a number of private KYC service providers came into the market.

With the recently established SWIFT KYC Registry to align with the updated Wolfsberg Due Diligence Questionnaire (DDQ), SWIFT has now completed what in our opinion is a great leap forward in this effort. It is a significant development.

Standard procedure, finally

The KYC Registry offers banks efficiency gains in a number of different ways.

SWIFT experts ensure the work of collecting the information from members, instead of banks having to do so independently. This information is then made easily available from SWIFT’s own secure servers, so banks don’t need to build their own infrastructure, or bear the expense of keeping it secure.

As importantly, SWIFT takes on the task of validating the information and keeping it up to date. That means banks can be spared this task too while remaining sure that their data is reliable and current.

The KYC registry also offers a useful set of tools to simplify and enhance risk management procedures. This includes a KYC Advanced Notifications feature that can trigger alerts if the profile of one of their correspondents changes.

It also offers an Adverse Media Module which scans media outlets for negative news about correspondents. This is something that regulators expect, but it can be costly to do on one’s own. With the KYC Registry, this task can be efficiently outsourced to experts.

Worth looking into

The KYC Registry won’t of course eliminate all correspondent banking compliance burdens or costs. But as mentioned, in our opinion it eases individual efforts and represents a great leap forward.

As one of the world’s largest correspondent banks, we know firsthand how costly and complex this type of KYC compliance can be. We have also been intimately involved in the issue since its early days.

UBS was one of the first supporters of the Banker’s Almanac project. As a founding member of the Wolfsberg Group, we played a key role in developing the Wolfsberg Principles. We were also involved in developing the original Wolfsberg Due Diligence Questionnaire, which came out in 2004, and in the work to produce the updated version that has just been released.

The new KYC Registry is a big chance for our industry. We encourage all our colleagues who haven’t yet to learn about and begin using this tool. If you are already registered but have correspondents that are not, we encourage you to invite them to join. The Registry even offers a new invitation function to make this process more efficient.

With over 4,500 banks in 200 countries already using the SWIFT KYC Registry, the tool covers a large swathe of our industry. But there is always room for more.

After all, there are a lot of banks in the world.

Peter Haener

Peter Haener is Head Financial Crime, Region Switzerland.

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