Adriaan Kom
Let us walk the tightrope between meeting compliance rules for onboarding customers and delivering sustainable, ethical business growth. David Zalman spoke for almost every boardroom executive when he highlighted the pressure compliance puts on a business. The chairman and CEO of the U.S. financial services company Prosperity Bank commented, “I’ve been in banking since 1978, and today, probably over half of my time is spent with regulatory requirements.”
Chief compliance officers (CCOs) and other executives will nod their heads to that. The KPMG 2015 CEO Survey 2015 reveals that the regulatory environment is the most impactful issue for CEOs today. PricewaterhouseCoopers’ survey of financial services CEOs found that 89% are concerned about over-regulation. And the regulations keep on coming—witness the fourth EU Money Laundering Directive, concerning personal liability for company directors.
One of the boiling points for that compliance anxiety is onboarding new customers. Picture the scene. Your CEO calls you on Friday night saying the company has won a major new deal in Asia. The revenue opportunity is immense—and the CEO wants the customer signed on Monday. It’s your job to navigate the continually changing due diligence regulatory environment and verify the authenticity of the potential customer. If you stop the transaction, you need to be 100% clear about the reasons why and have the facts to prove it.
That onboarding process is incredibly complicated and time consuming. Adherence to all the ‘anti’s’—anti-bribery, anti-corruption and anti-money laundering—alongside Know Your Customer and potential FATCA compliance, call for rigorous, resource-intensive screening processes.
According to the U.S. Department of Justice, for example, more than 90% of its anti-corruption actions involved a company’s use of third parties—anyone from a customer or contractor to a lobbyist or agent. Third parties can be the initiator of bribes on a company’s behalf (with or without the employees knowledge), or more commonly, they are a facilitator—transmitting or disguising a bribe. The pace of change escalates the problem too. Information changes on customers and the global business environment at an unrelenting rate. This makes it harder than ever to keep data fit for purpose.
Companies that ignore the risk of non-compliance when onboarding customers do so at their peril. Just ask Barclays Bank. The financial services giant was recently fined £72 million by the UK Financial Services Authority after its wealth management arm ignored its own processes in a sensitive £1.9 billion deal. The regulator concluded that the bank ran the risk of being used to launder money or finance terrorism. So how do you become a business enabler, not a ‘Doctor No’? How do you balance compliance against efficiency and deliver the due diligence needed to onboard new customers, kick-start financial transactions and minimise regulatory and reputational risks?
Establishing a compliance perimeter to onboard customers
The solution lies in the creation of a compliance perimeter, comprising consistent, relevant, global data. That data insight is used to balance risk against ethical business growth. And to give the green or red light to that new Asian deal your CEO asked you about on Friday night. So how do you do it?
Verification
Relationships aren’t a series of isolated interactions. They are an interconnected web of engagement that evolves over time. A relationship platform creates a singular, integrated view of the data and insights required to manage what is often a complex web. You need to ask yourself: Is the information accurate? Is it complete? Timely? Can the information be verified by more than one source?
Ownership
Establishing beneficial ownership when global organisation structures are so complicated is one of the greatest challenges associated with onboarding. You need global share ownership analysis and research tools that help you get to the ‘holy grail’ of beneficial ownership faster, more frequently and with less risk.
Screening
Screening businesses and individuals against sanctions, politically exposed persons lists, adverse media as well as litigation and deeper levels of due diligence, is a critical phase in the onboarding process. Access to risk intelligence allows you to disarm threats—whether it is to combat terrorists, fraudsters and other risk types. That intelligence needs to be comprehensive too: spanning every aspect of US, European and International sanctions and securities exchange actions.
Audit
Remember that Asian sales deal? Your CEO may well ask the reasons why you rejected the deal for risk and compliance reasons. Data insight allows you to manage your target entities by creating a full audit trail, adding notes and storing this information within the application for archiving and reporting, avoiding duplication of effort and cost.
Make no mistake. Today’s business environment is becoming increasingly regulated in order to enforce ethical business practices. However, no customer is the same; no deal is the same. A data management and data governance framework that spanning global regulations can help organisations perform the necessary customer due diligence, onboard customers more quickly and achieve their overriding ambition: ethical business growth.
The author, Adriaan Kom, is Director European Channel Enablement at Dun & Bradstreet.
