Thursday, March 2, 2017


Know your Customers' Customers
Let us say that you are a senior officer at a New York City bank, making a tough decision, under risk management guidelines, regarding whether to retain, or terminate, a correspondent relationship, with a local or regional Caribbean bank, due to KYCC issues. Or perhaps you are the president of that Caribbean financial institution, desperate to retain that correspondent relationship, but unable to give satisfactory assurances that your own KYC is effective enough to satisfy the NY bank.

What can either banker do ? we have all heard the reasons why overseas correspondents, in the current age of "de-risking," for economic, geographical, historical and statistical reasons, can present  high risk profiles, We also know that such banks may never achieve KYC at the level of North American banking best practices, for those same reasons.

Know Your Customer's Customer, or KYCC, is fast becoming a requirement of best practices, and, contrary to what most bankers believe, there is an effective solution, which will not only save those  treasured correspondent relationships, they will permit them to be further expanded, due to the confidence that the solution instills in the users.

The KYCC solution, which was created by experienced compliance officers, working in overseas environments, where correspondent banking relationships are considered a lifeline to the global financial centers, involved the creation of a technological solution, which would minimize risk down to the lowest possible level.

The result is a program that not only collects, and verifies, all customer data, of all clients in the correspondent bank, but maintains an alert for any change in circumstances, and automatically notifies the bank of its existence. The North American bank has a window into all the correspondent bank's clients, in essence creating a superior KYC program, at the correspondent, that functions as a KYCC.

This is achieved when the correspondent's clients, new as well as existing, input their required customer identification data, into a program which will automatically verify the data, and assess risk levels accordingly.  A second generation, cloud-based program, including Dark Web resources, performs the necessary investigation.Those customers who present with unsatisfactory levels of risk are identified, so that the correspondent bank may take the proper action to protect the bank.

Both the major bank, and the overseas correspondent, now have a result that not only allows the trusted retention of the customer relationship, but have a program in place that will monitor the clients' activities, and alert them to any change in circumstances. The major bank then also installs the program internally, and apply it to its own customer base, thereby creating a more effective KYC of its own customers, as its own clients are now validated by the automated program, and the same monitoring system also now protects the bank against a material change in its own clients' circumstances, or conditions.

As compliance costs are always a matter of concern, and no bank wants to continually be required to raise its budget, for new technology, this system is paid for, not by billing either bank, but by a nominal monthly, administrative charge to bank customers.

The net effect is the creation of a robust KYCC program, that protects the bank, while at the same time, creating an internal KYC program, where it. It is a win-win for both banks, and protects their future relationship, on an anticipated long-term basis.

The program, which was created by the Cayman islands-based Global Risk and Data Authority, or GRADA, represents a huge advance in KYCC. No longer must a bank, fearful of the level of KYC at the correspondent, terminate the relationship. It now has total access to the correspondent's CIP, with all customer data duly verified.

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