Capco Blog

A robust data management program leads to strong KYC due diligence

By Steve Rubel and Jill Brachhausen-Orhun

Given the recent attention to Know Your Client (KYC) policies and procedures due to the negative publicity of sizable infractions as well as increased regulatory scrutiny, financial institutions would be wise to invest in initiatives that strengthen their client data management programs. KYC solutions, and many other business-critical functions, like sales, marketing, risk and finance, all require customer data, so establishing a strong data management foundation makes good business sense.

An effective KYC due diligence program has the following characteristics:

  • Robust customer identification and verification processes are in place.
  • Data captured during the account opening process is tied to KYC procedures and new accounts cannot be opened unless a valid and current KYC is in place for that client.
  • Required data is captured to properly risk-score a new client, which would then drive the level of due diligence needed, using a risk-based approach.
  • Identified risk factors are used to monitor transaction activity and automatically trigger a KYC review and re-risk rating of the client.
  • The KYC periodic review process will account for profitability and client experience balanced against identified client risk factors.

All five characteristics rely on client data. Because data is so fundamental to a strong KYC program, developing a centralized, customized view of client information helps facilitate all data-related initiatives in a financial institution. When implemented as a core foundation, data management programs will support meeting regulatory requirements mandated by FinCEN, Basel II/III and Dodd-Frank, and will assist organizations in complying with other new regulations being imposed on the financial services industry.

Initiatives to improve client data processes are occurring throughout the industry, although not all are tied to strengthening KYC activities. When financial institutions do act to improve KYC procedures, many are doing so to address regulatory deficiencies and to avoid regulatory sanctions or further criticism. As a result, many organizations focus on fixing the immediate problem rather than launching a robust client data management program that solves for multiple issues.

However, regulators are becoming smarter and this limited response is no longer as effective. If a problem is discovered in a financial institution’s global markets business, for example, regulators may suspect that similar issues exist in other areas. If an organization has customer data issues in one area, it is likely to have similar problems across the enterprise, especially since few organizations have successfully solved for, and manage, a truly “golden source” of client data.

To address overall customer data issues, financial institutions should work to improve data management throughout the organization. A robust data management program that offers an enterprise-wide, holistic view of client data should include:

  • Executive sponsorship that supports a multi-year, multimillion-dollar data program that involves revamping legacy data across silos and fixing years of workarounds to systems to provide a clear view of client data.
  • Good governance to standardize data definitions, data views and identifiers that are used across the organization.
  • Data sharing that offers flexibility and the ability to share a single view of clients across different business units, within data privacy constraints.

Data management programs that include these characteristics provide a strong foundation that allows organizations to also strengthen their KYC due diligence by, for example, more easily integrating anti-money laundering with fraud transaction monitoring. Client relationship management systems can be linked with other customer systems to provide a holistic view of customers across the organization, not only for cross-selling but also for reducing capital charges.

A robust data management program can help organizations break down silos and offer an enterprise-wide KYC due diligence approach.

What is your organization doing to strengthen its client data management program and improve KYC due diligence? Join the discussion.


Combine this with the regulatory requirement under Dodd-Frank to use so-called Legal Entity Identifiers (LEI) you set the foundation to (re-)build your customer data management function on.

Financial institutions should use this moment in time to install a company-wide single source of information which can help to analyse the huge amount of data that otherwise will either devour the FI or pass it by unnoticed...

Exciting times we're living in...


Concise and to the point. For larger Financial Institutions and complex financial arrangements with large corporations across geographies, a robust, well maintained Entity Reference data repository is key. KYC, being a mandated initiative, provides for a strong argumnet in favor of instituting Enterpirse level ERD initiatives whose reach goes far beyond the confines of KYC

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