Over the last five years, banks have been focusing their operational investments and executive mindshare on compliance, and in this time the cost of compliance activities has increased ten-fold. Also, in the last three years, the focus for compliance has been on customer profile activities that utilize reference data – e.g. Know Your Customer (KYC), Anti-Money Laundering (AML), and the Foreign Account Tax Compliance Act (FATCA). Here I take a look at how one vendor, TCS, is approaching KYC compliance on behalf of its banking clients.

Two key questions facing bank executives are:

• Will compliance activities subside and, if so, what will supplant those priorities in bank operations? (compliance is a notoriously cyclical activity, changing focus to respond to the latest headlines or subsiding in good times)
• Can investments in KYC/AML, which focus on static reference data, be leveraged to produce real time business insights and improve ongoing business activities?

With reference to these questions, I recently spoke with TCS about their KYC services. TCS has been providing KYC services to banks for the past ten years. Their KYC practice:

• Has 15 global banks as primary clients
• Supports KYC activities across APAC, EMEA, U.K. and N.A.
• Employs 4600+ operations practitioners across the client onboarding life cycle spread across KYC, AML and Transaction monitoring
• Has a run rate of ~2m set-ups annually and over half a million remediation portfolio.

TCS started the practice based on its IT services capabilities, which allowed it to deliver increased automation for manual processes. Today, clients and regulators are looking for an approach to KYC/AML that emphasizes automation (brain) over scaled manual processes (brawn). TCS works both with client solutions and its own proprietary solutions to deliver these services. Clients typically prefer to use their legacy software for reference data-based compliance services (e.g. KYC), but are increasingly looking for new solutions to manage transactional compliance services (e.g. AML modules from TCS).

TCS is taking steps in building use cases developed from data used in compliance which is driving business value from its KYC/AML engagements. Examples include:

• Reducing account maintenance activity: Compliance activity identifies dormant accounts and the underlying reasons for dormancy. Using this information, TCS has been able to close 30% of dormant accounts
• Reducing turnaround time (TAT): Legacy account opening systems based on Excel spreadsheets resulted in 49% of data being incomplete. This was because data from improperly transcribed account opening documents was not easily accessible. TCS was able to introduce automation with operations redesign to complete this process with minimum latency.

Automating processes reduces the data silo effect, allowing banks to leverage existing assets to reduce costs. TCS is working to develop revenue-generating offerings based on use of compliance data, including:

• Using AI to predict a customer’s risk profile
• Identifying customer lifecycle stage, potential, and appropriate offerings.

In summary, TCS’ experience highlights the trends occurring in the banking compliance market, including:

• Compliance initiatives will decline in areas of remediation. However, the need for ongoing compliance support will remain strong, and this will increasingly need to address the twin business objectives of revenue generation and cost reduction
• Automation is key to mitigating internal silos, which trap data where it can only be used once. Reuse of existing data via automation will help drive cost reduction and increased revenue
• BPS vendors are shifting the focus of their offerings from process execution for banking products (e.g. account opening) to data management, a sub-process which spans the length of a product process, as well as multiple product processes. Furthermore, superior data management will allow optimization across portfolios of offerings, not just within a single offering.