Given the greater emphasis placed on KYC processes, compliance officers are under pressure to have all relevant due diligence information at their fingertips. In particular, 69% of survey respondents find that collecting reliable and accurate UBO (Ultimate Beneficial Ownership) information challenging, despite the introduction of centralised UBO registers in several countries, most notable with the EU’s adoption of AMLD5 (the 5th Money Laundering Directive).
In Asia Pacific, Singapore and Hong Kong all companies must maintain a register of controllers. In Malaysia, companies are also required to maintain basic ownership information, which is available to the public, however, Australia and Japan have been slower to implement firm legislation.
The report also found that 76% of respondents continue to find rising costs and onerous processes a challenge in KYC. The highest priority for 67% of respondents is avoiding regulatory fines and enforcement action, yet 81% are struggling to adapt to changing regulatory requirements.
Meanwhile, 77% of respondents say they must undertake manual and repetitive tasks to complete KYC checks. Recruiting and training of specialist staff also emerged as an issue frustrating the KYC process, with 68% of respondents flagging skills shortage as a challenge.
Financial institutions have also been struggling to justify the profitability of maintaining higher risk counterparty relationships, due to the increased effort required to conduct due diligence and obtain the necessary documentation. In the survey, 84% of respondents confirmed they review high-risk entities in a different way to low risk entities – a figure that has increased from 74% in 2014.
In 2014, 58% of respondents had over 250 financial counterparties; this reduced to 47% in 2016 and 43% in 2017. Over the same period, the number of financial institutions with fewer than 250 counterparties has increased.
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