Who approves the KYC details

Know Your Customer: What This Means for the Financial Services Industry

With Ground Truth, financial service providers can quickly meet key legal requirements when it comes to knowing their customers

“Know your customers” - what could generally be understood as an invitation to companies to seek closer contact with their customers has a very special meaning in the financial services industry. In this industry, “Know Your Customer (KYC)” stands for a legally required verification of the legitimation of certain new customers in order to prevent money laundering.

The legal basis for this procedure is Article 8 of the 3rd EU Anti-Money Laundering Directive. Generally speaking, only so-called “standard small customers” without extensive or particularly unusual financial transactions can be excluded from an examination. To do this, however, they must first be divided into a correspondingly safe risk class.

For all other customers, banks and insurance companies must collect, store and regularly update the following information:

  • Natural persons: type of professional activity and purpose of the business relationship
  • Legal persons: type of company form, activity, branch, branch code, number of employees, ownership structure, company structure, most important (expected) financial indicators

In addition, the origin of funds and assets as well as the details of the planned customer relationship such as the scope and types of payment must be documented.
With so-called (PEPs) - the abbreviation stands for "politically exposed persons“- the function and place of exercise must also be documented.

The data of all persons involved in the creation of the KYC master document and of course all future changes must also be logged. It is also about recording, for example, how willing a customer is to take risks when it comes to investing money and which forms of investment are therefore suitable with which investment horizon and strategic investment goal.

The consequences of non-compliance with the KYC documentation requirements can be drastic: If the special requirements are not met, financial companies face severe fines, imprisonment for executive employees or even the withdrawal of their business permit - not to mention the damage to the image of such a procedure.

Compliance Teams "Spend Too Much Time Collecting Data"

This is the result of a survey by Deloitte from 2015. Only 32 percent of the compliance experts surveyed said that they are “convinced” or “very convinced” of their IT systems. That is 41 percent less than in 2014. Deloitte suggests that this is due to the small size of the compliance teams, which are accordingly forced to rely on other departments to provide them with the data they need. The main task of these teams is therefore to collect the data instead of aggregating and analyzing or documenting it.

In addition, international corporate conglomerates with complex corporate ties and ownership structures pose a major challenge when it comes to meeting the KYC requirements.

Because of this we have with GROUND TRUTH Developed a solution and process methodology that leads to a quality-assured database, on the basis of which companies from the financial sector can in particular carry out a reliable and resilient KYC legitimation check. The classic "Golden Record“, Ie the central master data record of a customer or prospect, is enriched with transformation rules that describe the access to interaction and transaction data, ie the movement data, in the various data sources. The “Golden Record” becomes the “Golden Profile”. For the first time it enables a really complete, precise and current one 360-degree selft on the customer.

If companies from the financial services industry want to make sure in the future that they meet all the requirements of a “Know Your Customer” legitimation test, they should definitely not do without GROUND TRUTH.

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Ground truth is the foundation for sales growth and new business models against the background of digital transformation, for example for the optimization of sales and marketing activities, campaign management, blacklist matching, compliance or customer relationship management. The focus is on the golden profile of each customer, i.e. the golden record, enriched with interaction and transformation data (movement data). With the ground truth, decision-makers no longer move in a vacuum, but have a firm grip on decision-making.