Based on our ongoing dialogue with existing and potential CoorpID customers, we have identified five KYC challenges that financial institutions (FIs) are facing today. In this series of articles, we aim to break them down one by one. In our latest blog, we examine the KYC skills shortage that is hindering compliance efforts.
Successful KYC strategies rely on a mix of robust data sets and advanced digital regtech tools, of course, but that doesn’t mean that FIs can neglect the human element that remains central to compliance. However, many FIs are experiencing difficulties when it comes to recruiting KYC analysts and compliance personnel.
Skills shortages across digital sectors are not difficult to find – but they appear particularly pronounced in KYC-related fields. According to a survey by Deloitte, having sufficient numbers of adequately trained AML staff was cited by 55% of respondents at leading banks and FIs as being among their biggest AML compliance challenges. Meeting this challenge will require FIs to adopt a different mindset – one where they focus on streamlining the KYC process, rather than throwing more resources at it.
Why more analysts is not the answer
The extent of the skills shortages could easily lead FIs to seek ever greater numbers of KYC analysts – particularly with regulations seemingly in a constant state of flux. However, this will consume an ever-growing amount of resources. A KPMG study from 2021 exemplified the demand that KYC is placing on FIs in terms of labour hours, finding that between 10 and 15% of employees at the four largest Dutch banks were occupied by KYC and other compliance-related activities. Since then, this percentage is only likely to have grown.
To meet a severe shortage of skilled KYC analysts and compliance personnel, FIs are having to call in external Customer Due Diligence remediation support to prevent the KYC backlog from growing larger. Some estimates have concluded that a KYC review of a single medium-risk corporate client can take an average of 45 man-hours. Outsourcing manual and low-skilled KYC work to low-wage countries is also becoming more and more difficult and costly. This approach, as well as simply expanding KYC teams continuously, simply isn’t sustainable in the long term.
The need for greater numbers of skilled KYC analysts and compliance personnel is leading to rising operational costs. To place this in perspective, the average bank spends €22,984 a day on KYC programmes, with only 26% of this expenditure directed towards technological solutions. The expansion of compliance teams is only likely to result in KYC spending rising further – the right technological innovation could see it fall.
This doesn’t mean that KYC analysts are unimportant. They remain crucial to effective KYC strategies but require support from the right regtech tools so they aren’t weighed down by resource-intensive manual tasks. Increasingly, FIs are beginning to realise that throwing more people at the problem is not the answer. Instead, streamlining the entire KYC process should be the aim of using smart digital solutions. Of course, while this will require an increase in capital expenditure in the short term, it will reduce operational costs in the long run, as well as the risk of substantial fines being imposed for non-compliance.
Finding the skills you need
The aim of digital KYC solutions is not to replace KYC analysts or other compliance personnel – but to support them. A global survey found that KYC analysts spend almost half their time simply converting data into a usable format. This is not an efficient use of company resources – especially when these analysts could be providing genuine value-add, such as by carrying out evaluations of high-risk accounts.
At CoorpID, we’ve created a platform that aims to streamline the KYC processes being employed by FIs so they can focus on testing the skills of their KYC teams on the truly important compliance tasks – not manually scrolling through spreadsheets or sending yet another email asking for financial data. It provides a structure around which KYC analysts can deliver their best work. That’s certainly been the experience at one of our clients in the transportation and logistics space:
“We are currently using CoorpID to speed up onboarding across numerous bank accounts that we have across the European Union. It’s a helpful and easy-to-use service that provides more structure, which means I don’t have to use emails to meet KYC requests.” – CoorpID Transportation & Logistic client“.
There’s no doubt that KYC skills are in high demand. But ever-greater numbers of KYC analysts aren’t the answer. Instead, CoorpID makes it easier for FIs to request, manage and store KYC information – without needing the involvement of KYC analysts at all. Automate those repetitive manual tasks so your KYC experts can be deployed where it really matters.