Swift has announced plans for a ‘know your customer’ (KYC) registry, currently being piloted by a handful of banks across the globe.
The registry is essentially an online database to collect and distribute information required by banks as part of their due diligence processes. As such, banks will have access to a central repository of quality, up-to-date institutional information collected by Swift from participating banks. The initiative will not only help banks manage compliance challenges, but also reduce the high costs associated with implementing KYC-related regulation.
Swift CEO Gottfried Leibbrandt says in a release issued by the company: “Compliance with financial crime regulation is one of the major challenges that banks face globally, and customers have been asking us to provide industry-wide solutions to streamline their associated processes, cut cost and reduce risk. Swift is meeting that challenge with the KYC registry, which leverages our core strengths: our community, our network, our expertise in standards, and our track record of operational excellence.”
Swift launched a dedicated compliance services unit towards the end of last year and appointed Luc Meurant in Belgium to head up the business. Meurant is building a team of sanctions, KYC and AML industry experts to create compliance-related solutions for financial institutions and tells GTR that the team will be 100-strong by the end of the year. Hires will be made externally and internally within Swift, and experts will be based around the world.
The registry is Swift’s most recent financial crime compliance solution. Still in its development phase, it will go live with a controlled version in 2014, with general availability to financial institutions earmarked for the end of the year.
The need for such an initiative was referenced at last year’s Sibos event by HSBC’s group managing director, chief executive global banking and markets, Samir Assaf, who said in his presentation at the opening plenary session:
“We all do KYC; we all source the same data but there is no value added. There is no proprietary value for us all in doing KYC, so we should be looking to create a KYC utility with other players in the market, which will save costs and improve practices in the industry.
“An independent, auditable data aggregator could provide this service for multiple banks. It would be cheaper and more transparent for regulators, and there would be enforced standardising in valuation, which ultimately is good for everyone. The other positive effect of creating these kinds of utilities would be to create better data. By performing their processes once and then distributing to many, in a way the utility will act like Wikipedia.”
While the new registry is very much like Wikipedia in that Swift hosts and manages the utility while member banks retain ownership of and are responsible for their own information, Meurant tells GTR that there are significant differences: banks are able to control who has access to the information, and Swift undertakes quality checking of the submitted information, and also enriches the data with additional material.
He tells GTR that the only factor that may hinder the initiative is that its success very much hinges on critical mass. Nevertheless, he reports that both large banks and smaller banks have been keen to get involved. (The smaller institutions because they want to be seen as good citizens of the financial community.)
Although the registry will initially focus on correspondent banking requirements, according to Meurant, Swift may extend the service to, for example, board members within the financial institutions, or to corporates.
He says that trade finance banks have shown great appetite for the registry because of how it would assist them in finding out more about their transaction counterparties.