How technology can turn KYC into a competitive advantage

ABN AMRO, like most organisations within the financial services sector, faced serious changes following the implementation of rigorous new internal Client Acceptance and Anti-Money Laundering (“CAAML”) policies and changes in regulations like the US Patriot Act of 2002 and the EU’s Market in Financial Instruments Directive (MiFID). Both regulations were aimed at creating a market that was deeper, more competitive and more robust against possible abuse and fraud.

A product of this was a number of Know Your Customer (KYC) requirements for financial institutions to have a full understanding of their clients. The aim was to help prevent identity theft fraud, money laundering and, of increasing importance, terrorist financing. 

Organisations must now comply with a large range of constantly evolving due-diligence requirements – it is no longer just a case of ensuring that a potential client meets certain criteria prior to engagement, the client must meet the criteria throughout the length of the relationship too.

Challenge
ABN AMRO needed to implement a solution that could consistently capture data on clients, provide full risk assessment, assist with ongoing event driven regulatory requests or policy changes and give a record of important documents and resource relating to the relationship in a number of international languages. With local regulatory requirements differing in each region, there was also a need for flexibility and customisation in every country of operation. This would allow the bank to quickly identify suspicious behaviour, monitor transactions and access critical information at speed whilst catering to individual local regulators.

Like many large traditional banks however, ABN AMRO’s data and IT systems had grown over many years using many technologies. Added to this, the large number of separate BUs around the world had not always standardised on methods of storing and accessing data, creating disparate silos of information which were difficult to interrogate and even harder to join up for KYC purposes.

As early as 2001, Tony de Bree, currently Senior Program Manager CORDD/Services at ABN AMRO but at that time global programme manager eTrust at ABN AMRO Trust, was charged with his team to find and implement a flexible KYC solution for the 6 off-shore countries in ABN AMRO Trust. He explained, “KYC presented us with a number of hurdles to jump. The key issues were how we would find a way of recording new client information, linking it to a risk analysis system and simultaneously store all related communications and documents across a multitude of business segments and IT environments. Added to that, we were under extreme pressure to have a consistent global solution implemented as soon as possible; one that could be easily accessed by all key stakeholders and that could be adapted to local regulation where required.”

It became clear to the CEO of ABN AMRO Trust and de Bree that it would not be easy to combine all the different databases with existing technology and that instead it should employ a service-oriented architecture (SOA) approach that would allow it to focus on presenting the data as a service to front-end applications, in a secure and compliant way.  The bank eventually turned to edge IPK, a specialist in the presentation layer of SOA.

Solution
edge IPK’s flagship product, edgeConnect offered an open presentation layer platform that not only matched ABN AMRO’s SOA requirements, but also allowed a solution to be developed at speed and with the full involvement of business analysts and relationship bankers within the organisation as opposed to merely IT.

This method drastically reduced the time in which a solution was ready to implement. De Bree explained, “Many IT projects suffer from over development issues. Organisations still insist on building systems from the ground up using offshore resources and throwing developer hours at a problem until they reach a solution. We had neither the time nor the budget for this and, ultimately, we knew we had the required data in place and the knowledge and experience about the clients and our business, it was just a case of finding a way of joining up and creating the business process and workflows that would under-pin a robust front-end interface. edgeConnect offered all of this.”

After that successful implementation in six countries in combination with electronic document management systems, the same approach was adapted by a number of different business units within the Group; covering different types of clients like International Commercial Clients, consumer clients, private banking clients and commercial clients.

Working with a number of the BUs, edge IPK delivered in this way a series of contingency and structural applications that could assess the risk of new or existing clients and single out any that were deemed worthy of further investigation. A major benefit of the more structural solutions was that they create an environment in which compliance became intrinsic to every process, providing the bank with a high level of assurance that ongoing activities were well within the letter of the Policies to be applied.
 
Using flexible and dynamic Web 2.0-look-alike front-ends, edgeConnect presented users with a clear, concise and consistent method of inputting data – a single view that hid the host of complex systems, processes and the databases on the back-end.

By integrating with other systems within the bank such as financial ledger applications or CRM solutions, edgeConnect could also provide automatic, swift ongoing analysis of characteristics of different types of clients if certain circumstances highlighted the need for another risk assessment.

The final implementation was to be a multilingual, 80% blueprint solution rolled out across the BUs, with 20% allowing for a tailored approach to accommodate local regulatory necessities.

Results
A number of projects were carried out around the world with ABN AMRO’s BUs, the second of which took a mere four weeks to roll out across 30 countries in the Global Due Diligence Management environment of International Commercial Clients. Using a web-based delivery method also drastically reduced the amount of time required for implementation in each office. This time to market, previously unmatched in projects of this nature, was attributed to “early visualisation” – the ability to outline and visualise a solution during the development phase using interactive development and end-users involvement.

“Early visualisation gives us great advantages for these projects. The industry was coming under extreme levels of pressure to quickly implement solutions and meet compliance requirements,” commented de Bree. “By allowing the end-users and the business to drive the development of the solution rather than IT, edge IPK ensured that by the time we reached the testing phase, all major stakeholders were in agreement to progress. Most IT projects hit serious walls at this stage because IT and business are not closely aligned enough, but using edgeConnect our second project took less than a month and the third one only two and a half months.”

Cost savings came in the form of both time and money. De Bree estimated that on average project times came in at 20% of the usual timeframe and at 20% of the usual cost. Not only that, but because the bank was able to reuse internal resources, the team was only 10% of that normally required to facilitate such a project.

Other benefits included saving further time by being able to centrally implement new or amended regulatory policies (a process which could take months or even years in some cases), and becoming an innovative example within the industry of an organisation that can prove compliance, reassuring both regulators and customers alike using new technology.

De Bree concluded, “In the face of the challenges, edge IPK was one of the partners that gave us the power to effectively use our current data, avoid disruption and above all save serious time and money. It demonstrated that being and staying compliant doesn’t have to be costly; it can also be extremely beneficial too. As a bank, ABN AMRO has benefited greatly from being a leader amongst its peers, attracting interest from around the industry and from the market at large.”