Do You Know Your “Know Your Customer”?

Unknown customers

Nothing is more unknown that the know your customers. There are as many as banks. It remains the indecipherable equation, the impossible quest or the “seem-to-be-easy-but-is-not”. When you think about itthere is no reason for not being able to develop a common standard KYC solution. However, I don’t know why but it seems to be like climbing the Everest. Do banks really want to get a solution? I don’t think so. If so, they would try and search for solutions. So far, nothing has been really done or nothing has survived. Does it mean it is impossible? Not at all. To me, a common KYC is like climbing a cliff. Looks tough, steep and vertical; but it doesn’t prevent stakeholders to at least try to find a solution or several solutions. I’m please to see that few irreducible devout pioneers who still believe it is possible. If I had to predict the KYC future, I would see a national local solution in a country like Luxembourg, which tries hard to develop a solution, a bank proprietary solution (and here again at least one is trying) and eventually the SWIFT KYC registry. SWIFT was so obvious that no one has understood why they haven’t yet set up the solution. They claim it is ready. We will see... One of the issues with SWIFT is the need to be member of the network (or user), even if they claim it should be extended to “MNC’s” (without further precision). The solution should satisfy corporates if they want us to adapt it. The second issue is the increasing cost related to SWIFT with their Customer Security Program (CSP), which put the bar higher and higher and pushes users to contemplate other host-to-host or outsourcing solutions (e.g. COBASE, Gresham, TIS...).


As international solution, I think that CINFONI is the most promising one. On the local level, in Luxembourg, a country of financial innovation, there are initiatives on the blockchain (with ABBL, TELINDUS and SNT) and with a third party-validator with I-HUB. Don’t ask me which is best or better. We simply need to start, to get fewvolunteers on board and then the “chicken & egg” principle will be circumvented. We need to start somewhere with something. As for the FX platform in the year two thousand, there were few of them with limited participants. They gradually grow to cover today the whole market. As soon as something reliable and robust will be up and running, it will fly high.


Per aspera...

I don’t want to claim it would be easy. If it was simple, it would have already been done. There are some issues to address. For example, GDPR (if you pass via a third-party validator) or the business model to set up (free for corporates and paid by banks, although it is not written in stone) and guarantees for security of the solution, which is key. However, such solutions may also be a sort of vehicle / solution to store data, which are often saved internally on Outlook.

I hope solutions will emerge and that the ones I have mentioned, will be live soon. I want to give my full support to all sound project. I encourage treasurers and treasury associations to endorse any initiative that may fly. SME’s are looking for a local solution, large MNC’s look for SWIFT solution (providing they are SWIFT users) and others for an international solution cross-border. Everything is possible and imaginable with a minimum of goodwill. Easy to complain and treasurers love to blame banks on KYC’s. But who really tries to help developing a solution? Pilots of the SWIFT KYC registry? Certainly. For other solutions, we will need support, endorsement and sponsors. But I am convinced the momentum is there and open doors to solutions, hopefully and eventually.












Does “KYC” stand for “Killing Your Customers”?

In French we would call it the “Arlésienne” (Arlester), the one we never see. It is so close and so far, at the same time. Nevertheless, it would be a win-win project: saving time and headache for corporates and saving money for banks. Isn’t it a quick win for a bank which is facingmountain of compliance rules? The key success factor is in my opinion to gather faith, goodwill, standardization and concessions on the past habits. It won’t be possible without all stakeholders’ support and even with national supervisors, who should also play their role. At the end of the day, supervisors locally must verify that banks have applied properly their KYC principles. We should not wait for the new EU Commission, which will never rule KYC. It won’t be imposed by EU. It must be developed by stakeholders. KYC becomes a killer of new bank relationships: if you do not expect enough return on a client why onboarding him?


To be successful, it must be carefully thought

I also believe that the business model applied to any KYC solution must be carefully thought and known at inception by customers. It is a potential hiccup or blocking point. It cannot come afterwards, without having been precisely defined upfront. Corporates remain fair and know that even 75% of the whole KYC exchanged via a secured digitalized solution would be fantastic. Eventually, technologies are there but not the will to set up a solution. I have the impression banks in general are resigned, as if it was wishful thinking.

I will keep you all informed and likely come and ask for your support and cooperation. Thanks in advance to my peers for their help. Don’t launch the cushion in the arena on the poor toreador, come and help us in getting the oxtail and its ears. You are part of this game.