Banks should adopt a holistic view in managing and monitoring risks. A more systematic approach will help banks prepare for new waves of regulations while strengthening the trust of their clients and stakeholders.
To meet the expectations of supervisory authorities and bank shareholders, what do we need to be aware of in 2022? Here is a quick overview of what you should have on your radar based on our experience, what we are seeing in the market and indications given by the Swiss Financial Market Supervisory Authority (FINMA) and other foreign regulators.
Evaluate the quality of your "Know Your Client (KYC)" data
In recent years, many banks have chosen – or have been forced – to implement KYC data remediation procedures. Such processes are designed to improve the quantity, quality and structure of information concerning clients and in particular, the client’s source of wealth, the source of funds as well as the development of their career and funds. This is set to continue in 2022. The KYC data must be complete, documented and precise enough to enable a third party to obtain detailed knowledge of the client from the data alone. If this is not the case, targeted remedial action should be provided.
Corroboration of the origin of the assets
Regulators make it clear that financial institutions must obtain and hold records of the documents that corroborate the origin of a client's wealth. Clients must document and provide sufficient evidence of the source of their assets. The higher the risk associated with the client, the more important it is to confirm the source.
Periodical review of clients without increased risk
The new Anti-Money Laundering Act (when it comes into force) sets out the principle that clients without increased risk will need to be reviewed periodically. This will be a major undertaking for banks, requiring considerable resources and time. Banks would be well-advised to start planning these periodical reviews and define the methodology (review of KYC data, transactions, public information, etc.).