In recent years, more and more accountants are turning to automated software tools to help with KYC checks. But are they getting the right tools for the job, and are the benefits often claimed for these new tools really being delivered?
It’s a truism that to deliver the best results you need the right equipment – but when it comes to the process of taking on new clients, just how should those results be measured? Is it a case of taking up as little staff time as possible before you start providing services, or of learning as much as possible about your new clients?
Some of the answer to that is going to turn on what services you’re providing – a simple check of books and records each year end prior to tax filings and renewing the bank overdraft facility for a family gardening business is going to be a very different proposition to providing business support to a high net worth entrepreneur with multiple ventures and business partners. Providing support and advice to incorporated businesses is a different proposition to taking on a partnership or sole traders.
But in every case, there are some bare minimum checks that must be done to satisfy compliance regulations – anti-money laundering obligations are now increasingly supplemented with counter-terrorist financing rules, with regulated advisers needing to collect information about identity, background and even source of funds before providing services in most jurisdictions.
All too often seen as nothing but a regulatory burden, is there any additional value to the adviser that can be driven from this process? And if not, how can the costs be minimised? Technology is one possible solution, but it comes at a price. The Big 4 can afford to build bespoke tools and regimes, but what’s the outlook for smaller practices who have to buy in off the shelf products from developers who may be more focused on what they can provide than on what the customer needs?
The underlying justification for AML and CTF checks themselves is of course the public good. Measuring the direct value to an accountancy practice itself of completing the checks isn’t easy, although quantifying the potential costs of not carrying them out, or of not doing so carefully enough, is far easier.
But are there any positive returns that these checks could generate, and if so, how can they be maximized? One UK practice had a stark reminder of the importance of client knowledge when they ended up in court accused of failing to offer appropriate tax advice to an overseas passport holder – a characteristic fundamental to the individual’s tax treatment, and is of course central to a KYC check.
But even having that knowledge would be of little value if it’s locked away in a filing cabinet and forgotten about until there’s a regulatory inspection. That’s where, in theory, computerised tools come into their own.
Automation and mechanisation are the future – delegating repetitive, tedious, menial tasks to automated processes has long been a goal of those who yearn to spend their time on more inspiring activities, such as advising clients on how to make more money. But advanced customer relationship management software can do even more, cross referencing clients’ known characteristics to highlight opportunities (and risks).
The challenge is always populating the software, and keeping it up to date, which is where a rolling program of KYC compliance might kill two birds with one stone. Combining the basic information collection required for KYC with basic information collection required for KYC with other more tailored details could form the basis of a client profile which can be called up before every meeting.
Looking further ahead, digitized registries of company ownership and control could help businesses build a picture of their clients’ contacts and interests, just as they help law enforcement build a picture of criminal networks.
But is that something that the available tools are delivering? And is it something that the authorities are in a position to support?
As part of an upcoming report looking into the evolving world of client due diligence checks and the role that they can play in crime fighting and possibly the broader client relationship, ACCA are conducting a global survey of small and medium sized practices experiences of the KYC process. We’re interest to know whether you’re using commercial software tools, or the reasons why not. Whatever the process followed in your firm, ACCA would like to hear from accountants involved in KYC checks – you can complete the short (5 minute) survey by following the link:
If you’ve any queries about the report, or would like to contribute in another way, please contact ACCA’s head of tax and business law, Jason Piper, at Jason.firstname.lastname@example.org.