Client Onboarding and KYC - 5 common complaints from the Front Office and why they happen

One of the most common comments we hear from senior leaders of Client Onboarding, CLM or KYC functions in Financial Institutions, is that their Front-Office is frustrated with these processes.

Often, technology is held up as the solution to this problem, but in our experience, there are many underlying causes of their frustrations that are not related to technology and must be addressed before technology is brought into the conversation. In this blog, I look at the 5 common complaints from the Front-Office and the role policy, process, people, culture, data, and organisational design have to play in resolving these issues and delivering a better experience for the Front-Office, the end customer and Operations teams alike.

 Common complaints

 1. “The onboarding process is taking too long”

For many Front-Office teams, the onboarding process is too slow, often taking weeks or months to onboard new clients or new entities. Often, when progress updates are requested, there is the added frustration that little progress has been made.

Underlying causes can include:

• Poorly designed processes due to legacy processes, organisational structures, policy and procedures, or a lack of deliberate process design. All of which can result in too many process steps, an inefficient allocation of work and general inefficiencies.
• Poor communication between the Front-Office and Operations about the priority of cases, progress of cases, clarity of requirements, client responsiveness, expectation of capacity and timelines.
• Inefficient workload management across individuals and teams, leading to a poor allocation of resources. A lack of service levels can also contribute to the inefficient use of capacity.
• Poor ways of working between the Front-office, Operations and the supporting functions. This is critical to a smooth overall process and can be impacted if teams are not working effectively together due to physical, geographical, or cultural barriers.

 2. “Why are we asking our client to provide that?”

Another common complaint from the Front-Office is that the Onboarding, KYC or Financial Crime Compliance teams are asking for information from the client that they feel is unreasonable. This could be information about the shareholders, directors, nature of business, or more. This has the potential to damage client relationships or worse, cause a loss of business, as well as strain internal relationships.

Underlying causes can include:

• Limited use of a risk-based approach whereby you need to assess your risk to Money Laundering and Terrorist Financing and tailor your approach. This means that there is not a one-sized fits all approach and your approach should be tailored depending on the client risk. Often these types of ‘unreasonable’ requests stem from more of a tick-box approach.
• Overly risk-averse policy and procedures that require more information from clients than other Financial Institutions within the same jurisdiction. Overly risk-averse policies tend to be more prescriptive and are generally more difficult to implement at an operational level. Further to the point above, risk-adverse policies often lack a true risk-based approach and create reams of tick-box requirements which slow the process down, lead to incomplete profiles, and push back from Front-Office or Clients.
• Misunderstood policy and procedures can often be the cause for these types of requests, potentially because of limited training or poorly written policy and procedures. It is also often the case that regional differences have created a lack of alignment between policies in different jurisdictions, which creates added complexity and can lead to further issues.
• Poor quality control can mean that these types of requests for information are not caught before they hit the Front-Office and / or Clients. This can be avoided by ensuring adequate quality control processes within teams, the right level of experience in role, support mechanisms within the team, and process controls (were appropriate).

3.  “We haven’t got any capacity to work on that”

A constant characteristic within most onboarding and KYC functions is that the teams have a full workload, lack capacity, and have a large backlog of cases. This leads to frustration in the Front-Office when existing cases are moving slowly and there are new clients that they want to onboard.

In addition to the points already discussed above, underlying causes can include:

• Poor prioritisation of cases – both from the Front-Office and within operational teams. This is often due to a lack of visibility for Front-Office teams' of current cases and workloads, as well as poor engagement between them and onboarding teams.
• Ineffective offboarding processes which potentially add unnecessary clients to the KYC refresh population who could be removed via an effective monitoring and offboarding process e.g. due to inactivity or risk.
• Limited use of SLA and KPIs to monitor performance and set agreed service levels both within teams, as well as across teams and business functions. This is a highly effective way to drive performance and set expectations across the business.

 4. “Where is this case in the process?”

Given the sometimes iterative nature of KYC, multiple components within the process and multiple people contributing to any one case, a seemingly simple answer can be very difficult to obtain or have confidence in its accuracy.

 Underlying causes can include:

• Lack of regular clear reporting resulting in a general lack of transparency. This is at the heart of this issue, and can be exacerbated if there is not regular reporting with clear, well understood updates. Providing there is sufficient engagement in the report and between the teams, this can help bridge the gap.
• Poorly defined case statuses do not provide clarity about the real status of the case i.e., further information is normally required to provide the clarity of the actual status. This can be further evidence of poorly defined processes which are overly complex or have too many hand-offs.
• Lack of an appropriate responsible owner, whether it be a complete lack of a single responsible owner, to giving ownership of coordination to the Front-Office who do not have the expertise or capacity to effectively manage this activity. The other scenario is poor quality of coordination, where there is a ‘responsible’ owner’ but in practice, they do not take real ownership of the case from front-to-back.

5.  “We’ll need to go away and look into that”

One of the most common areas of frustration across this process occurs when a seemingly simple question is asked (for example, about client accounts, client risk, the client population or a client’s KYC status) but it requires detailed analysis to be conducted which can take days or even weeks – often returning with multiple ‘versions of the truth.’  

Underlying causes can include:

• Poor data quality from poor legacy data models which are not fit-for-purpose. Data quality also suffers through incomplete datasets, multiple entries for the same client due to lack of master data management (or entity resolution), and a lack of current or historical data governance.
• Limited access to data either directly or via data visualisation tools. In most organisations, data needs to be requested from an individual or team who require specialist skills to query the existing data, placing a reliance on key individuals to pull datasets from various systems. These requests often need to be raised via ticketing systems and can take several days to receive. When the data is received, it then needs to be analysed, combined / cross-referenced with other datasets, and adapted appropriately, taking further time and effort.
• Multiple systems of record where often the data is not consistent across different systems e.g. legal entity names, and can be challenging to reconcile, making it difficult to establish single version of the truth.
• Poor process controls creating complications in establishing a single version of the truth, e.g. onboarding legal entities multiple times across regions. This can create huge challenges in terms of understanding true numbers, statuses, and other factors across your population.

Do these complaints sound familiar? If you are struggling with any of these issues, you are certainly not alone. We work with our clients to resolve such issues and other common challenges within the Client Onboarding, CLM and KYC space. Get in touch if you would like to discuss your challenge and how we can help.