KYC Compliance & Fraud Prevention Day: Five things compliance officers must keep in mind
With advancement of new technologies and the emergence of digital revolution, corporations are now exposed to more business risks than ever. In the recent past, various financial crimes and frauds have led the regulators and lawmakers enact a number of regulations for corporations to comply with and move risk management and compliance up on the boardroom agenda. The cost of non-compliance is huge and therefore there is also a growing focus on ensuring a thorough KYC check for corporations.
As we observe KYC Compliance & Fraud Prevention Day today, we take a look at five things that compliance officers must understand and be entirely cognizant of:
Five things compliance officers must do right away:
1. Transition from Know Your Document (KYD) to Know Your Customer (KYC)– The KYC process needs to move beyond just collecting documents. Business across various industries must run an enhanced due diligence check to know who they are doing business with. This would include validating information provided in the documents, establishing Ultimate Beneficiary Ownership, and uncover related hidden risks.
2. Be aware of increasing focus on personal liability – A study by Thomson Reuters reveals that regulators around the globe are increasingly scrutinizing and holding compliance individuals accountable for any lapse in regulatory requirements. The Senior Managers and Certification Regime (SMCR) was introduced by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) last year to increase individual accountability within the banking sector. We may perhaps see similar guidelines from Indian regulatory bodies, as our economy gets more aligned with global standards.
3. Invest in RegTech – The fast changing regulatory landscape along with the emerging geo-political risks has made it imperative for compliance officers to deploy an effective regulatory technology to better understand and manage risk. According to a report, most banks across the globe are adopting Regulatory technology including anti-money laundering (AML) systems, with integrated risk intelligence. In addition, banks are adopting RegTech to help automate compliance tasks and reduce operational risks associated with meeting compliance and reporting obligations.
4. Mitigate third party risk – A highly-globalised business environment such as our exposes organizations to several risks associated with supply chain, data breaches and natural disasters among others. Some risk areas that have become particularly important to both the public and private sector and can cause huge reputational damage include bribery and corruption, financial crimes and sanctions, slavery and human abuse, conflict minerals and environmental crime. Compliance officers need to leverage data and technology to manage third party risk from initial screening and due diligence through to ongoing monitoring and training of employees and third parties.
5. Be aware of the cost of non-compliance – Apart from the reputational damage, non-compliance can cause huge monetary loss to companies in the form of fines, legal fees, dip in stock market price among others. It is, therefore, important for compliance officers to have a robust and comprehensive risk management system and KYC process in place.