Streamlined CLM and KYC Processes

An optimised Client Lifecycle Management (CLM) process creates a comprehensive and accurate 360-degree client lifecycle view that captures every data point of your client’s journey and analyses the data to generate insight into client-preferences and enables proportionate Financial Crime Controls to be implemented.

In recent years, as the focus has firmly shifted to technology and more effective data and process management, the CLM architecture has competing requirements which include:

• Relationship data in the front office.
• Related customer legal entity data on which due diligence must be done.
• Management of customer risk rating within global operations across multiple systems.
• Related customer accounts in multiple systems.
• Data and banking secrecy rules.
• Global and jurisdictional governance structure, managing the risks.
• Global operating model and local jurisdictional requirements.

The process, systems and data architecture required to support a global financial services firm with its CLM requirements is complex and the global governance of such an architecture is difficult to get right.

In addition, increasingly complex regulations means that most financial services firms are seeing the speed of client on-boarding drop to a lower rate and the productivity in their CLM teams declining. Processes such as data gathering, screening for Politically Exposed Persons (PEPs), sanctions and adverse media and enhanced due diligence are particularly slow.?

The effective management of the lifecycle of a client relationship will improve customer experiences and reduce the overall costs of maintaining relationships. The efficiency of initial on-boarding might well be the difference between winning a deal or not. During each stage, speed and efficiency must be balanced against effectively conforming to regulatory requirements. Regulatory KYC checks are a costly but necessary process for all financial institutions and other regulated firms. Also, KYC is a requirement which is often seen as a burden at the point of on-boarding but is also an on-going requirement via periodic review cycles and event trigger reviews.?

The CLM Cost-Maturity Curve

In our experience, the cost of compliance tends to reduce over time as firms mature and the FC controls are embedded in the business-as-usual activities (BAU). The initial cost outlay, to ensure that firms comply with regulatory requirements, tend to be higher, but at some point, which we refer to as a firm’s ‘maturity point’, there is a noticeable saving per customer file as controls become more efficient.

Many firms still only have the basics in place with very little automation of processes, a lack of global consistency and potential gaps in controls and limited evidence of regulatory compliance. By addressing gaps in controls and by introducing some automation, there will be an increase in cost over the short-term.?By embedding effective policy, process and technology this will start to reduce over time.

A fully optimised firm will have implemented an operating model including the use of modern technology applications to drive efficiency while ensuring ongoing compliance across the firm. This is illustrated in the below CLM Cost-Maturity Curve diagram which indicates a reduction in cost, in line with maturity levels when financial controls function optimally.

Cost Reduction and Operational Efficiency?

In an attempt to streamline and lower the costs associated with KYC, the financial services industry has looked at ways of centralising and improving the processing of KYC reviews and other CLM related requirements, as well as trying to share the client data necessary to complete the KYC checks given that many clients are multi-banked.

It is therefore evident that there is a lot for firms to consider when designing a KYC and CLM Target Operating Model (TOM). The struggle is always going to come down to compliance, cost and efficiency. These issues are going to be underpinned by the resources, systems, and locations which firms need to consider when dealing with the complexities of KYC and CLM processes. Couple these two factors with the internal forces of business requirements, operational processes and regulatory controls, then the complexities surrounding the operational design become amplified even more.?

When the CLM efficiency model is implemented correctly, research indicates that firms can achieve a total saving of approximately 60% over three years. This calculation is based on a 10% saving due to increased individual performances and an 20% saving in the team performance space followed by a further 10% saving when processes are optimised and finally a 20% saving in the technology due to new technology.???It should be noted that experience shows that the implementation of new technology following individual, team and process gains will usually lock in those gains yielding 60% saving overall.??

Lysis Group can help firms to develop Target Operating Models (TOMs) and roadmaps to achieve your firm’s agreed strategy. We have developed a best practice CLM operating model which can be applied to ensure that all elements of a firm’s ecosystem are considered with the objective of optimising all touchpoints. We also advise firms on the most effective operational strategy for executing CLM/COB/KYC given the firm’s geographical coverage and customer mix.

We have a range of CLM/AML People, Process and Technology diagnostic tools that help to identify issues and inefficiencies in CLM/AML operations and a number of techniques to improve the situation.?

CLM Efficiency Improvement Roadmap?

Our CLM/AML change design, change management and business analysis specialists can utilise our diagnostic tools when looking at people, processes, and technology:

• People – 28% efficiency saving?- our diagnostics look at individuals and teams. We find that fixing some fairly common issues with the knowledge and skills of team members and the cohesion and effectiveness of teams can improve efficiency by up to 12% in three months and a further 16% in twelve months.
• Process?–?10% efficiency saving?- by identifying simple policy-neutral process efficiencies, we find that we can support improved efficiency in the first three months and then embark on policy/procedure changes which require more consultation to achieve efficiency gains in months 4 to 12. The 10% saving is on top of the 28% saving from the People category and some of the 28% saving is dependent on process changes.
• Technology – 20% efficiency saving?– we find that most efficiency gains that require major technology overhauls become apparent in years two and three.??If the People and Process gains have already been made, the impact of the technology changes will seem low (20%), but it is engineered on a solid people and process platform that is fit-for-purpose. The technology changes are thus enshrining and locking-in all the improvements already made as well as delivering additional improvements.

Experience goes a long way

Our extensive track record of helping firms to optimise their CLM processes has a distinct focus on reducing the short-and long-term costs linked to compliance and at the same time, promote organisational growth. This can only be achieved when clear objectives have been identified, are reviewed regularly through active engagement and if there is an emphasis on the planned outcomes.?After all, the main objective of effective CLM is to identify opportunities for growing revenue, boosting operating efficiencies, and enforcing compliance throughout the client lifecycle.

Contact us

Contact us to set up an introductory meeting to take you through our capabilities and demonstrate how Lysis Group can assist your firm with their unique Financial Crime Compliance (FCC) and Client Lifecycle Management (CLM) requirements.