Two weeks after my first speech, I decided to go for my second. The objective was to organise my speech into an Introduction, Body and Conclusion, and to have proper illustrations for the Body and to have proper transitions between the various parts.
Entitled, “Why KYC is important to the bank?”
I started by explaining what Know Your Customer (KYC) is. Basically, it is the exercise of Knowing Your Customer, by obtaining sufficient information about the customer in order to enable the Bank to form a profile of the customer. Information required include:
Name, IC number, Address, Occupation, Date of Birth, Nationality, etc. Then, proper documentation is taken to verify the authencity of the information.
I also mentioned that many people think that KYC is just to fulfil a regulatory requirement, and that only the compliance function should be involved. Yes and No, I said. It is that…. and more. The following are 3 reasons why KYC is important to the Bank.
1. It sells more products. When you know your customer, you can actually cross sell more products that the customer might need. Say you have a youngster wanting to open a current account. By obtaining the information, you find out that he is also a student, and may be short on some finances. You can actually propose to sell a study loan to him. Without that information, you would have lost out a sales opportunity.
2. It prevents you from potential lawsuits. Say an elderly lady customer walks in and wants to purchase a Unit Trust (UT) product with all her savings. You may be tempted to sell the product. Say the customer does not have the right risk profile for UT you may have unknowingly sold the product to her. If she lost her savings, she may one day turn back to sue you for not explaining the risks to her.
3. It prevents the Bank from facilitating fraudulent transactions. Say a noodle seller customer of your bank comes into send a Telegraphic Transfer (TT) of RM5 million to Brazil. If you did not have his usual transaction patterns recorded in your system, you may allow the transaction through, even though the transaction does not meet the profile of the customer, and may be considered highly suspicious.
In conclusion, with the above 3 examples, you can see why KYC is important to all functions of the bank, and not exclusively a compliance function.
That’s all, thank you…. till we meet again….
