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Pain Points: Treasurers Struggle with KYC Requirements

  • By Andrew Deichler
  • Published: 10/5/2015

rulesregsTreasurers are losing patience as they scramble to comply with their banks’ increasingly invasive know-your-customer (KYC) requirements. This was a major topic of discussion at the latest meeting of AFP’s Treasury Advisory Group (TAG).

“For us, KYC is always a problem,” said one treasurer who works for a charitable non-governmental organization (NGO). “The banks are trying to focus more on keeping the regulators happy and prove that they have the toughest KYC rules in the world.”

The treasurer explained that in recent months, his organization has been getting KYC requests from even its largest banking partners. In response, he gathered treasurers from other organizations who were receiving similar requests, went to the bank, and told them flat out: “Don’t start this, because you’re going to do it, and then someone else is going to follow suit to catch up with you.

A bank representative countered that banks face serious consequences if they do not vet their customers thoroughly. “I think the banks find themselves between a rock and a hard place,” he said. “Of course we get the complaints from our clients. But the consequences of being noncompliant are just severe.”

Another banker noted that banks are trying to apply KYC consistently across their client base, however, it’s still a work in progress. “That’s something the industry is learning,” he said. “I may not need to apply it the same way for a major corporation as I do for 50,000 small businesses that may be up to something. And there are complexities among very large companies; who they source from, where they sell to, etc. Unfortunately in this country, the banks are that gatekeeper, and we’re charge with protecting the payment clearing system."

Nevertheless, the banker acknowledged that even though there are “bad guys” out there, banks can’t just say, “This is the rule; I’m going to apply it to every one of my clients.”

The banker added that U.S. treasury departments actually have it easier than treasury functions in some other nations. “With Canadian regulations, you have to provide driver’s license numbers and other information for the CEO of a company. It’s harder than what we do,” he said.

Solutions for treasury

The NGO treasurer recently spoke with the U.S. Treasury Department and found that the banks are largely going above and beyond what they are being asked for. “We got a letter from the Treasury Department, saying, ‘From now on, anything your banks ask for, in terms of vetting requirements of your board members, etc., give it to the bank, but send us a letter letting us know that your bank is asking for this. We did not know the banks were asking for this,’” he said.

The treasurer encourages treasury groups to voice their concerns to their banks, so they can pass the message along to the regulators. “Send an email to the bank. Your complaint email will be forwarded to the regulators,” he said. “By not talking, you have no power to influence. In our sector, we’ve taken to sending emails and saying ‘Cut it out. You guys are working for the regulators and you need to be working for us.’ And it’s really working.”

Additionally, he urged bankers in attendance to work together with treasurers to push back against these regulations. “You, as a bank, cannot tell the regulator to back off. But I can. Tap into us. We’re feeling the pain,” he said.

A treasurer for an investment firm explained that when her company gets a KYC request from one of its banking partners, treasury asks the bank a series of questions in response. “We’ll ask if there is less information that we can make available, she said. “We’ll also ask for a written explanation of who has access to this information, how the bank is going to use it, how it’s going to be secured, and how it’s going to be disposed of when it’s no longer needed. When you ask all of those questions, you’ll often find that what they actually are willing to take in terms of information decreases considerably.”

Looking ahead, the group suggested that AFP could potentially gather corporations, banks and regulators to voice treasurers’ issues with the current KYC process. “Voice the pain points, highlight the lack of coordination,” the NGO treasurer said. “A lot is written and then left to interpretation by banks. The banks then interpret it and implement it. It makes matters worse.”
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