KYC Outsourcing – Look Closer, Look Deeper

With increased regulatory scrutiny and new regulations, organizations are finding it more difficult than ever to manage an efficient & effective Know Your Customer (KYC) process.

Managing the KYC process is time consuming and can be virtually impossible in some countries where a lack of records and language difficulties, make independent checks difficult to perform.

In this context, it certainly makes sense to outsource the function to experts such as KYC outsourcing companies, who have developed time-tested methodologies and processes, to produce fast, cost effective and reliable information.

But, while selecting a vendor to manage your KYC outsourcing requirements, it is important that the organization looks closer and deeper across critical parameters, to ensure that the outsourcing company (vendor) meets the organization’s (customer’s) statutory obligations, effectively and efficiently.

To ensure that any outsourcing of its KYC obligations will satisfy the organizations ultimate statutory liability, it is essential that the organization:

1. In the context of the proposed outsourcing, determine exactly what KYC processes are required for it to comply with its KYC obligations under the law in respect of its particular business .
2. Identify in detail exactly what is required of the KYC outsourcing company in order for the organization to satisfactorily discharge those KYC obligations during the term of the outsourcing.
3. Ensure that the documentation and procedures used by the outsourcing company in discharging those KYC obligations (eg, the application form completed by the customer) is settled and agreed between the organization and the outsourcing company, and may not be varied without the consent of the organization.

In the case of many organizations, the customer identification and verification obligations can be logistically challenging, costly and burdensome. It may be tempting for reporting entities to consider outsourcing purely on cost grounds. However the statutory requirements and obligations must always be considered very carefully. Does the use of a KYC outsourcing company, enhance the organization’s ability to meet its statutory obligations and does not diminish its ability to meets its statutory obligations?

When any organization considers outsourcing its KYC obligations, it must consider the risks of the outsourcing itself in the context of its statutory obligations.

It is imperative that the organization provides a clear, in-depth brief, which will ensure that the KYC outsourcing company (vendor) fully understands what is required, in terms of scope of work. Further, the organization must also make detailed inquiries, in order to ascertain that the service provider can, provide the necessary services, efficiently and effectively. To ensure this critical phase, the organization should establish a comprehensive list of parameters for vendor selection, so that it can properly assess the ability of the shortlisted vendors to perform its KYC obligations effectively and efficiently.

For more information about our services please contact:

Mar Hernandez m.hernandez@amicorp.com