Navigating toward more effective Know Your Customer operations

The evolution of the “Know Your Customer” process

Financial institutions are spending as much as 35 percent more than necessary on Anti-Money Laundering (AML)/Know Your Customer (KYC) operations. In examining numerous major banks’ AML/KYC programs over the past five years, KPMG research indicates that the higher-than-necessary costs are directly related to banks’ inefficiencies in processes, data management, and information technology systems, among other functions.

It is estimated that up to 80 percent of the effort associated with AML/KYC is dedicated to information gathering and processing and only 20 percent to assessing and monitoring that information for critical insights. At the same time, the tiresome process, repetitive questioning, and long processing times create a frustrating experience for customers and employees.

In short, the AML/KYC function at many banks is broken and/or significantly underperforming. Financial institutions worldwide are spending billions annually on financial crime risk management. Yet, fines and other sanctions imposed after findings of banks’ noncompliance have actually increased in the past three years. We believe there is an answer to this convoluted set of circumstances. We advocate addressing the compliance challenges in a way that not only complies with regulation to avoid fines but also saves time and money while making customers and employees less frustrated with the complex process of AML/KYC compliance.

With the KPMG Know Your Customer Navigator, KPMG is helping firms identify areas that are creating limitations to effectiveness, providing target areas of improvement, and recommending action steps to get the work done.