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Blog: A single customer view - critical when mitigating financial crime risk


Carley Gibbs - financial crime risk

First published by Thomson Reuters during September 2017

Customers are at the centre of any business, yet few firms truly understand who their customers are.

Many have records for the same person located across different data systems and, all too often, the data held in those different systems is inconsistent.

Identity theft accounted for more than half of the incidents of fraud in the UK last year. With fraud and money laundering remaining high on the regulatory and risk agenda, detecting and preventing identity theft continues to demand attention. Firms must remain focused if they are to control the fast-changing threats to which they are exposed.

Inadequate customer profiling leads to inefficient transaction monitoring and a poor understanding of the financial crime risks faced by the firm. Conversely, dependable customer data, combined with trustworthy sources against which to check that information, enables the detection of fraudulent applications where false information is provided.

Achieving a single view of the customer is a significant challenge. Common reasons include: different data collection methods between current and historical products, independent/disparate systems, or the inevitability of occasional human error. However, having that single view will assist greatly with understanding what is "normal" behaviour for each customer and, therefore, what is not "normal" – the principle upon which mitigating financial crime risk is built.

Ensuring customer data is reliable

Many regulations specifically require firms to know their customers. As the need to gain an accurate view of who a firm is dealing with becomes a regulatory imperative, firms have the opportunity to assess and revise their data collection methodologies and systems for their own future benefit, as well as that of their customers. The regulatory initiatives that enforce this obligation include:

  • General Data Protection Regulation (GDPR). With the implementation date drawing near, many firms' GDPR compliance programmes are well underway. The ability to meet obligations, for example, in relation to data deletion and subject access, are reliant on a thorough understanding the customer data held.
  • Money Laundering Regulations 2017. The Fourth Anti-Money Laundering Directive requires firms to review and enhance their approach to customer due diligence (CDD). In turn, this requires firms to establish and maintain an up-to-date view of the money laundering and terrorist financing risk that each customer poses. As well as this, more prescriptive enhanced due diligence requirements are in place for higher-risk customers, particularly politically exposed persons (PEPs) and corporate structures.
  • Depositor Protection Rules. Since December 2010, depositor protection rules have required banks, building societies and credit unions to maintain a "single customer view file", with an update in 2016 that required the file to be provided within 24 hours of a deposit becoming an "unavailable deposit" or following request by the Prudential Regulation Authority (PRA) or Financial Services Compensation Scheme (FSCS).
  • Sanctions. The sanctions landscape is becoming more complex, with the introduction of new regimes, greater enforcement powers and a sharper focus from governing bodies, combined with the adoption of more transverse and risk-based tools. Firms require a precise and up-to-date picture of who they are dealing with and, where appropriate, the activity they are undertaking.

Barriers to a true view

Common barriers to achieving a true view of a customer include:

An increasing volume of customer data: Regulatory requirements regarding CDD, file storage and transaction monitoring, the increasing prevalence of digital channels and the recognition of the value of data for marketing purposes all mean that more and more information is being collected and retained.

Inaccuracy of customer data: Inadequate data quality assurance processes, whether relating to customer identification and verification, screening or simply human error, can reduce the integrity of customer data.

Disparity and duplication of customer data, particularly as a business grows and adopts new technology: Managing incompatible legacy systems is a "thorn in the side" of many larger organisations, particularly when they operate across a number of service lines, product lines, channels and jurisdictions. Storing data in different formats and across a number of platforms means that details for a single customer can be duplicated, or even multiplied, throughout the business.

Customer screening, identification and verification: Firms are grappling with how best to manage the interaction between internally-held customer information and that held by third parties, for example, when verifying customer and company information with Companies House, conducting credit referencing checks and conducting politically exposed persons (PEPs), sanctions and adverse media screening.

A single customer view for now and the future

Many firms have attempted to create a single customer view incrementally – by product, service line or event. Another method is to create a holistic blueprint of the data held throughout the organisation and then consolidate from the top down, starting with the firm's main systems, which, when combined, hold the majority of its customers. This creates value early on in the programme, with "quick win" single customer view files being identified where all or most of the data is already held, and those needing additional work going into remediation.

Undertaking a project that brings together the firm's internal data alone is not enough – this data needs to be continually monitored and verified against reliable external sources.

Rather than utilising a range of third-party systems, firms can now choose to access, via a single platform, a comprehensive "content engine", which pulls together, calibrates and consistently updates data from a diverse range of primary sources as well as secondary source screening systems.

Smart technology that sits across the firm's existing infrastructure ensures any changes and updates to customer data take effect across each of the systems throughout the business and at exactly the same time. This means that the firm's data is reliable, wherever it is stored, and, crucially, that its single customer view is scalable as its business evolves.

Leveraging the benefits

The benefits of unifying the firm's view of its customers are numerous, and include:

Mitigated financial crime risk and regulatory compliance: More accurate customer data and, subsequently, risk profiling, means the firm is now reliably informed of the financial crime risks posed to the business and better able to identify suspicious activity during transaction monitoring. Having a true view of a customer allows the firm to be compliant with its anti-money laundering, sanctions and reporting obligations. Knowing what information the firm holds and being able to access it quickly can reduce the risk of a data breach.

As well as the first stage in gaining a single customer view, mapping where the firm holds personal data and how this flows through the organisation, and being able to evidence that the firm has done this, is a vital step in the GDPR compliance programme.

Enhanced customer journey: The single customer view creates a "digital passport" for existing customers that contains all verified information provided to the firm, regardless of the business area. This would make it easier for customers to open a new account or apply for another product without repetitive requests for information, saving time and reducing strain on resources within the business. In an age where customer expectations are high, this can lead to greater customer satisfaction and fewer abandoned applications.

Maximised operational efficiency, reduced cost and greater revenue: Having a view that consolidates information on the firm's customers from each of its business areas helps the firm to have a better understanding of customers' needs and subsequently identifies opportunities to offer additional products and services. Holding consolidated and accurate customer records that can be accessed by any business area, and utilising technology that helps the firm maintain this information reduces dependency on manual intervention, meaning much faster processing that is more cost-effective.

Acting now

Financial crime, regulation and businesses are evolving. Now may be the time to harness the customer information the firm holds with a view to achieving these benefits in the long term. A single customer view allows the firm to safeguard both itself and its customers while offering more immediate and relevant services in a fast-changing, competitive market.

Firms' spending on compliance in this area will, by virtue of the increasing complexity of regulation and associated obligations, naturally increase. Gaining a consolidated customer view now will, in the long term, make this process less costly and more successful in terms of customer outcomes.