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The Challenges of Performing KYC Checks on Legacy Data

Updated: Nov 8, 2023


Women holding a mobile phone
Women holding a mobile phone

Retail is detail, so the saying goes. A tired cliché or a statement in accordance with the truth or facts? 30 years ago, buzz words like accountability, transparency and sustainability were for the hereafter. Banks in the UK are now required by law to comply with anti-money laundering (AML) laws and know your customer (KYC) requirements to prevent criminals and terrorists from using financial products or services to store and move their money. The levels of scrutiny UK banks are subjected to nowadays could not have been envisaged 30 years ago.


Know Your Customer (KYC) checks are a critical function in assessing customer risk and a legal requirement to comply with Anti-Money Laundering (AML) laws. Effective KYC involves knowing a customer's identity, their financial activities and the risk they pose. Know Your Customer (KYC) encompasses the policies and procedures put in place by businesses to manage risk and verify the identities of customers, clients and suppliers.


For many, data handling has become a justified obsession, but back then, the data that was collected was lacking detail at best and incomplete at worst. Let us use the hypothetical example of “Josephine Bloggs”. In the early 90s, she decided to open a bank account, but what if, in the meantime, she’s moved, married (maybe more than once), or, heaven forbid, is mortified and the financial institution wasn’t notified.


What if an individual forgot about their account? Is the original system used to onboard the customer still a functioning one? Highly improbable - it’s probably been upgraded, several times, with data migrating from system to system, potentially corrupted en route.

 

These issues are relevant to all financial institutions. Having incorrect customer details on their systems, gone away customers, default date of births, and missing fields, they’re all unsustainable inefficiencies. A good KYC policy or process can help financial institutions better understand their customers and their financial practices, making it easier to assess, manage and mitigate risk to the organisation.

 

By continuing to ignore issues around poor data quality, the hope of maintaining effective relations with these customers is a futile one because the starting point offers up too many inaccuracies.

 

The Tracing Group team has wide-ranging experience working with the UK’s largest financial institutions delivering remediation projects of this nature. We are here to help - contact us today for further information or call (01603) 937800.

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