What is Distributed Compliance and why do banks and financial services need it?

According to McKinsey, the risk function within banking and financial services will have a dramatically different role by 2025.

McKinsey believe that the risk function will play a vital role in collaborating with other functions to reduce risk – for example, by working more closely with the business to integrate and automate the correct behaviours and to eliminate human interventions.

The risk function’s tasks will be to ensure that compliance considerations are always top of mind and not addressed perfunctorily by businesses after they have formulated their strategies.

The detection, assessment and mitigation of risk must become part of the daily job of all bank employees and not only those in risk functions.

Artesian Solutions is leading the charge in this transformational change with its new ARCH solution – heralding in a new era of digitised risk decision making within financial institutions compliance management known as distributed compliance.

The why

Banks have invested heavily in data solutions and teams of compliance analysts to interpret data. This has been necessary to enable them to cope with the workload created by adherence to KYC.

However, the two don’t always work together resulting in relationship managers investing effort winning business only to be delayed or even blocked by compliance teams under strict regulation.

From a customer’s perspective, this disjointed process can be frustrating and damaging to a bank’s reputation.

According to Thomson Reuters, KYC Compliance: The Rising Challenge for Financial Institutions Report, client onboarding times have risen and customer experience is suffering, with 12% of corporate clients saying that they had changed banks as a result of KYC issues.

Likewise, Fenergo reports that one in three (36%) financial institutions have lost customers due to inefficient or slow onboarding, that 81% believe poor data management lengthens onboarding and negatively affects customer experience, and furthermore that 87% believe the client experience during the onboarding process impacts the lifetime value of the client.

Many banks have responded by building solutions ensuring that regulatory and compliance requirements can be adhered to by finding better ways to extract and scrutinise data, but few have looked at how to distribute the workloads these tech solutions create, in order to create a more efficient process for customers.

Until now…

The what

Artesian Solutions already serves the majority of the major banks in the UK, providing powerful sales engagement insights to relationship managers.

We have spent millions of pounds over many years, developing the knowledge and the technology to consume data in structured and unstructured formats, interpret that data to create useful flags and to drive appropriate actions.

Our platform sits at the heart of the corporate banking front-line. This puts us in a unique position to push appropriate aspects of the needs of risk and compliance to the front-line to ensure that banking relationships begin with the mitigation of risk.

Artesian calls this new approach Distributed Compliance.

Distributed compliance involves giving the compliance team control of a sophisticated decision engine to enable data coming in to have rules applied and tasks created.

Further, it means distributing these tasks to appropriate staff, monitoring the completion of the tasks and evidencing the whole process.

It places compliance at the heart of the business – front of mind for every member of staff, informing every decision, instructing every interaction, and shaping every relationship from pre-screens for new customer prospecting through to long-standing client development.

The benefits:

  • Reduction in analyst spend
  • Faster and more efficient customer on-boarding
  • Improved due diligence – improved ability to meet both regulatory and customer experience requirements
  • Allows compliance teams to focus on work which requires skill and experience
  • Full and transparent organisation wide collaboration
  • Automated audit trail and storage of evidence

The how

Artesian’s Risk and Compliance Hub (ARCH) distributes simple KYC tasks to Relationship Managers and other appropriate people in the organisation, leaving KYC specialists to deal with complex tasks requiring their knowledge and experience.

  • ARCH enables full and transparent collaboration in an organisation so that policy specialists can place KYC actions exactly where they need them, and so that front line Relationship Managers can really know their customers before they even engage with them
  • ARCH integrates with industry-leading KYC service providers so that clients can simply access their chosen providers and automate the creation of flags and tasks when there are matches, according to clients’ policies
  • ARCH enables organisations to make full use of their combined knowledge and expertise in different areas to ensure that regulatory needs are met and also that task queues are minimised through distribution, and the needs of the customer in onboarding are met
  • ARCH provides always-on monitoring of adverse media and will also match the monitoring policy of clients for PEPs, sanctions and SIPs checks
  • ARCH creates an audit trail containing details of each search, flag, task and evidence undertaken in the application of KYC policy, including the time it was carried out and by which user

ARCH for Relationship Managers

In early tests, ARCH has been 100% accurate in reflecting risk and KYC policy in pre-screening. In fact, it has (on average) uncovered 14% more risks than were identified in the onboarding process.

The data gathered in pre-screening has helped reduce the time spent in the data-gathering phase of onboarding by 90% – giving Relationship Managers more time to spend on building relationships.

“Artesian will help us put risk and compliance at the heart of our commercial process, to serve a greater need than regulation alone” – Jeff Courtney, Head of Portfolio & Planning, Business & Commercial, Metro Bank

Here at Artesian we want to inspire you to think differently about risk management and KYC compliance.

To understand more about the future of risk management and KYC and the opportunity of harnessing digitised distributed compliance please download our new eBook.