Bank KYC/AML compliance is broken, and blockchain can fix it

Not only is decentralisation the best solution. It might be the only solution.

One of the least-sustainable trends in existing financial services is hidden away in the background. Compliance costs, which refers to the cost of handling legal obligations such as KYC/AML, are a growing stone in the shoes of financial services.

And it’s growing extremely quickly. According to Thomson Reuters, the number of compliance professionals increased 3.5 times from 2016 to 2017, while financial institutions are pouring billions into transaction-monitoring systems designed to target suspicious behaviour, like frequent large cash deposits.

No one’s entirely sure where these investments will end. At a time when new technology is cutting costs across the financial sector, compliance and security costs are skyocketing year on year, with no end in sight.

“There’s no finite view of these costs,” said David Cassidy, CEO of the Kyckr KYC firm. “It’s an endless pool of investment.”

The endlessly growing costs of transaction-tracking software, staff training and the hiring of compliance experts, is half the problem.

The other half is that they don’t work, and perform terribly by almost any real metric. On top of the costs of implementing for these solutions, financial institutions still need to budget for the fines and reputation damage incurred when they fail.

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Source: Bank KYC/AML compliance is broken. Blockchain can fix it | finder.com.au