Banks must adhere to strict KYC (Know Your Customer) requirements, which include transparency in correspondent banking relationships. KYC-related compliance activities are very costly at a time when correspondent banking margins are under pressure.
Concerns about risk and a lack of transparency are leading some banks to cut off relationships with correspondents in some markets, a process known as de-risking.
“Because there is no global KYC standard and no central source for KYC information, banks now need to conduct bilateral document and data exchanges with each of their counterparties,” said Luc Meurant, head of banking markets and compliance services at Swift, the financial messaging service.
The 7,000 correspondent banks that use Swift have about 1.3 million correspondent relationships, and are conducting 1.3 million document exchanges, often on an annual basis.
Swift created the KYC Registry with the involvement of a working group of 12 leading correspondent banks, who agreed on a standard set of KYC information to address the needs of regulators in different markets. The KYC Registry will enable each bank to contribute their information for review and qualification by Swift. Once this information is qualified, it will be published in the Registry.
“Banks can then share it with their counterparties with the click of a button,” said Meurant. “Banks retain full control over their information and who has access to it. The creation of a single, secure source of KYC information will enable big banks to collect information from their counterparties more efficiently, reducing cost and risk.”
The KYC Registry provides a single, secure point of access for a standardized set of KYC information agreed by the world’s leading correspondent banks.
In connection with The KYC Registry, Swift has also launched the SWIFT Profile, which uses aggregated Swift message traffic data to provide an independent, fact-based overview of a specific bank’s direct and indirect/nested correspondent banking activities.
“It is commercially non-sensitive, and banks reserve the right to choose whether they want to share this information, and with whom,” Meurant said.
Banks can use their own SWIFT Profile to understand areas of risk exposure, and can share their profile with their correspondents to demonstrate transparency and compliance with regulations.
“The SWIFT Profile is the first added-value service that we are offering in connection with the KYC Registry,” Meurant said. “We intend to add additional services and will communicate on these in due course.”
