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What Blockchain Could Mean for Compliance Professionals

Authored by: Tim Coates, Consultant, Business and Management Consultancy, Synechron

Global banks are subject to Know Your Customer (KYC) requirements under a variety of regulations. Whether it is the USA Patriot ACT which makes KYC mandatory for all US Banks, The Money Laundering Regulations set out by the European Joint Money Steering Group in the UK or The Reserve Bank of India providing KYC guidelines, banks across the globe have a responsibility to collect thousands of data points about their customers, usually during client onboarding and to maintain that information on an ongoing basis to demonstrate everything from investment suitability to affective anti-money laundering (AML), anti-terrorist financing and more.

A recent research report published by TABB Group found that client data acquisition and onboarding processes, along with trading delays due to missing or inaccurate client documentation, are top concerns for buy-side firms, with 62 percent experiencing challenges gathering and maintaining KYC and AML data from their clients. In recent years, several KYC utilities have emerged to help compliance officers gather and validate legal entity data, categorize documents and confirm relationships on behalf of investment managers; however, a fragmented list of KYC Utilities from Markit Genpact’s to DTCC’s Clarient Entity Hub, has made it difficult for anyone to gain critical mass, and therefore, Corporates and Banks still need to share their data with multiple utilities and the information is not always current.

Blockchain has the potential to transform the way banks and corporates address KYC regulation and compliance by using the distributed ledger technology (DLT) to create a single consolidated view of the KYC data for untrusted participants (e.g. competing banks). Whereas current utilities only have 5-10% of the Corporate profiles needed for a profitable business case, blockchain’s DLT would make this data more widely viewable across participants.


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