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7 March 2014

Collaboration "the next step" for banking KYC activities

Content team

The development of a common set of standards for gathering crucial information will become more important for banks in the coming years as firms have to cope with increased demand on their compliance department.

This was among the conclusions of several senior executives speaking at a recent compliance panel, Banking Tech reports. Among the attendees was Bill Fox, global financial crimes compliance senior executive and managing director for Bank of America Merrill Lynch, who said: "For securities regulators, everything right now is leading back to anti-money laundering (AML). They always ask, 'why didn't your AML monitoring catch this?'"

His view was echoed by senior vice-president of enterprise anti-money laundering, anti-corruption and international regulatory compliance for American Express Richard Small, who said regulators are expecting AML and know your customer (KYC) screening to play a bigger role in institutions' activities.

"To the regulators, it's about the AML controls. They're not alleging money laundering, they're identifying the faults with the controls in place," Mr Small said.

Both panellists agreed that greater collaboration within the industry is essential if these activities are to be successful. Mr Fox said that it will be important for organisations to get together and set high standards that do not affect the commercial viability of operations.

Mr Small added that at present, there is no standard for gathering the necessary information needed for effective KYC and AML controls, with different institutions taking different approaches. But if businesses are able to develop a standard that regulators are comfortable with, this may make such activities more straightforward in the future.

Mr Fox also went on to detail some of the changes Bank of America has made to its compliance processes recently. He noted that instead of hiring large numbers of staff to sift through alerts, the bank created a system that compiles information from a range of different sources and then turns that feedback into 'events'.

These events are then assessed for their potential risk and, if they receive a rating high enough to warrant attention, are examined by a staff member. Mr Fox stated this has enabled the bank to achieve a conversion rate of around 70 per cent in terms of how many alerts that it receives require an action for compliance. More banks have a rate of between five and seven per cent, it was observed.

Content team, Bureau van Dijk

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