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IBS Journal October 2015


‘If doing the KYC alone costs €10,000, then you need to make quite a lot of money


from the customer before you make a profit.’ Hans-Joachim von Hänisch, KYC Exchange Net


ard Chartered on the European Coun- cil of the Bankers Association for Finance and Trade-International Financial Services Association (BAFT-IFSA) and chaired the BAFT-IFSA KYC Initiative. He raised the issues within this industry group and it was clear, he says, that everyone had the same problems. The idea behind KYC Exchange Net was


to find the areas where there was duplica- tion of work between banks. Banks were sending long questionnaires to their cor- respondents each year so that if a small bank in a developing country had 50 rela- tionships with large international banks, it needed to fill in 50 of these. Each one might take a week to complete. KYC Exchange Net has a single ques-


tionnaire that is intended to encapsulate all of the questions that were being asked on a one-to-one basis. This stretches to over 420 questions although some are conditional. The idea is that a bank fills out this form once and uses it to provide its information to all others. Small banks can either ‘push’ the completed questionnaire to their large correspondents or the large correspondents can use the question- naire to ‘pull’ data from their smaller cor- respondents. The questionnaire is online and, once filled in, a bank can decide which banks to send it to. They do not have to be members of KYC Exchange Net. When there are updates, the recipients receive a notification. KYC Exchange Net was launched at the


start of 2014. ‘Pull’ banks that have signed include Commerzbank, Société Générale and Standard Chartered. ‘Push’ banks include DZ Bank, others in Iceland and Rus-


sia, and Switzerland-based Privatbank IHAG (IHAG Holding is the majority shareholder of KYC Exchange Net). The greatest benefit, says Roger


Groux, compliance officer at Privatbank IHAG, has been the ability to fill in the questionnaire once, have it signed off by the bank’s management board, and then use this with correspondent banks rather than having to fill in separate forms, par- ticularly for the Wolfsberg AML require- ments. He points out that Privatbank IHAG’s relatively small size means it does not have a large number of correspondent banking partners but it has used the ques- tionnaire around ten times since adopting it in September 2014. This approach has had almost universal acceptance from its correspondent banks. Only one of these raised any queries, on a couple of the questions, and Privatbank IHAG worked with KYC Exchange Net to adapt these to make them clearer. This is different from the Wolfsberg questionnaire, where there was often a lot of correspondence back and forth to clarify points. ‘So my job is much easier,’ says Groux. When there is a request, the response can be done via KYC Exchange Net and the relevant documents can be selected from here. While there are plenty of regulatory changes on the way in Switzerland, Groux does not expect this to require major changes to the KYC Exchange Net ser- vice because of its focus on correspondent banking, rather than on the regulations per se. In other words, the questionnaire asks whether the institution is compliant with particular regulations but does not go into deeper detail about each one.


In terms of how KYC Exchange Net


complements and competes with other KYC initiatives, von Hänisch explains that the likes of DTCC, Thomson Reuters and Markit are focused on other areas, particularly investment banking, asset managers, bro- ker/dealers etc. The closest is Swift as the concept and target customers are similar. Swift’s KYC Registry relies on banks to add their own data and this is then enhanced with Swift-specific information, such as message flows. It is fact-based, unlike the ‘self-certification’ model of KYC Exchange Net. The types of questions asked by the latter are along the lines of, what is your KYC training programme for employees, how often is this repeated, and what are you doing in sanctioned countries? ‘We are very complementary to other providers, we aren’t a standalone solution, and I see us as an add-on to Swift,’ he says. ‘We know them, they know us, and we work with banks that work with Swift.’ Nevertheless, it is clear that Swift’s


arrival in this space has been an added complexity for KYC Exchange Net. Swift can make much more noise and has a much greater reach, admits von Hänisch. There is confusion among banks so sometimes the response is, ‘we’re filling out Swift’s form, why should we fill out another?’ The ability to attract ‘pull’ banks has suffered indirect- ly from Swift, he feels, and most of the suc- cess of late has come from the ‘push’ banks. He feels KYC Exchange Net might need to wait for Swift to be successful and to then push its questionnaire as a complement for a sub-set of banks, such as those in eastern Europe that are in countries under particu- lar scrutiny.


spotlight: kyc


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