KYC requirements: Is the bank being unreasonable?

 

As a norm, I picked up a copy of the Friday newspaper last week and paged through on my way to the till. One commercial bank ran a notice for its clients to submit their KYC documentation to the nearest bank or online to have their accounts updated. I had earlier on during the year saw a social media uproar when another bank ran the same excersise. Most people were complaining about this as they saw the exercise as a needless repetition.

Some even wrote proudly on the platform that they will never bow down to this requirement, or else the bank risked a possibility of them closing accounts to keep their hard earned monies under their pillows. I wondered if most of them knew what KYC means, its implications or was the banking jargon to blame.

But what is KYC? And why will all commercial banks go to the same periodic practice. In this edition, we will look at KYC in depth; discuss its merits on the overall banking experience and as a norm the resulting impact on customer service.

KYC is simply an abbreviation for “KNOW YOUR CUSTOMER”. This is a basic tool across all banks that is used as a common denominator against money laundering. Like it suggests, the bank should know the type of client who is being brought on board for a new relationship either at a personal or business level. This includes the identity of the client, where they stay or operate their business, their source of funds and the anticipated account conduct.

Across all banks, this information is a requirement at account opening and the client is bound to bring all this to be assisted. I have heard some clients lamenting that such and such a bank has stringent requirements and they will prefer going to another one, but rest assured and don’t be fooled, all banks have the same policy as it is a requirement by the central bank. Most commercial banks will have their policies framed to holistically incorporate alignments along customer acceptance, customer identification, and transactional surveillance and monitoring. All this combinations will enable the bank to build a risk and behavior profile for the client.

Using this profile, transactions that are out of character for the client can be easily identified and red flags activated to safeguard both the client and the banking institution. But to most clients, the biggest question is because this information is required at account opening, why should the bank then somersault and ask for it again 10 years into the relationship? The simple fact of the matter is because of business and general dynamics, some if not all of these submissions will change and hence the record held with the bank will need to be updated.

As a matter of fact, an individual will change employers, their salary will change and they will not stay in one residence for a long period of time. Even under a business relationship, directorship may change hands and the entity may move operations to new grounds. Now for record keeping and so that the bank may hold the latest and correct customer information, the call for KYC submissions is made.From time to time, banks engage on what is called periodic reviews. This is basically an insight into the account to check if the information on record is relevant and up to date. Should certain information be missing or deemed not up to date, the client will be contacted to update the information.

These periodic reviews are also necessary to validate the clients risk grading and transactional patterns and most important the validity of the information held. KYC requirements exercises are employed to capture and update such changes.

So as a client who knows my rights, am I at liberty to dismiss and refuse this call by my bank to submit these documents? I have observed that most clients will advance that the bank has such information, why should I?

But why should you not? Information held is never deemed valid until verified. Even if all the requirements have not changed you are still to summit for verification. KYC is a regulatory and legal requirement; all commercial banks will have internal controls and policy to enforce it.But can this KYC bo rder and infringe on customer service? I have always used one example to illustrate this.

One man applied for a cheque book and a card at his bank. The cheque book and card were delivered to the old postal address that was on the banks system. He came to the bank to complain about this, the bank records showed that this was the man who took offence when he was called to submit KYC documents. For the bank to always deliver good customer service, information is very important.

After all it will be a futile and demanding exercise to delight someone you do not know. So next time that KYC call comes, do not harden your heart like one famous ancient Egyptian King. Its a call for compliance, hounour it.

Phirinyane Moreri

Independent Service Consultant

The service Hawk BW