A Treasury Dream Coming True: Handing KYC to Corporate Governance

# Banking

# Risk Management

One treasury team made a winning case that the governance group should own KYC.

Call it reaching the treasury promised land or a dream come true. Whatever you call it, one treasury team’s early-stage success at shifting responsibility for know your customer (KYC) compliance to a corporate governance group generated plenty of buzz and some envy at a recent meeting of NeuGroup for Global Cash and Banking .

“I’m really excited to get out of the KYC business,” the member told his peers during the projects and priorities session of the meeting.

“I would LOVE to know how [he] convinced corporate governance to take over KYC!!” wrote one peer in the Zoom chat.

The member’s response: “Lots and lots of meetings and many examples of where ownership of the data should truly be managed.”

Don’t make it about KYC pain. Key to making the case that treasury should not be an owner of KYC, the member told NeuGroup Insights, is to avoid focusing on the burden of KYC and banks’ varying data requests; that pain is not going away anytime soon, he said.

Instead, the member focused on problems in internal KYC processes and the value of shifting ownership to a corporate governance group that sits between tax and legal. That would mean replacing the existing, fragmented approach where treasury was considered the expert for both bank and non-bank KYC requests.

“That’s how we kind of framed a lot of this up: This is not our comparative advantage; it never should be. So, [we were] trying to take more of that back into the groups where it should belong.”

He added, “We should not be responsible for knowing when to disclose our shareholders’ driver’s license and passport or social security numbers. Treasury shouldn’t own that data, in my opinion.”

The power of a diagram. His team put together a diagram for the company’s tax and legal groups showing the complexity of the company’s current system, where at least eight separate groups—including treasury, tax, business legal teams and the investment group—receive KYC requests.

Seven of the groups respond to the requests and five, including treasury, are the primary owners of KYC.

The result, treasury said, is inefficiency as well as inconsistent and potentially inaccurate information flowing to requesters. And there’s no clarity on who owns KYC across the company.

The diagram of the proposed solution gives the corporate governance group responsibility for responding to KYC requests and ownership of the process—improving efficiency, accuracy and consistency.

The point of walking the company’s tax and legal teams through the diagram was to get them “aligned with the value of creating a centralized group, outside of treasury, to manage KYC for the company,” the member said.

Traction and examples. “We started to get traction when we met with some of the heads of our legal and tax groups and they frankly didn’t realize how bad it was out there,” the member said.

“We started giving them more and more examples that we’re not really following a good model, and we may be giving inaccurate information in some cases.”

The key moment: “For us, it came from our head lawyer who said, ‘You guys have to take this and fix it’ to the governance group.”

A company-wide reorganization and centralization process also worked in treasury’s favor, the member said. Following the consolidation of tax and legal teams, “they’re more willing to listen on a [company}-wide scale.”

Another element of treasury’s case for reducing KYC responders to one group is that the multinational corporation is privately held and places great importance on protecting the privacy of its shareholder owners.

Under the approved transition, treasury will serve as an “escalation point” to banks and be responsible for naming account signers.

Be patient, realistic and watchful. The corporate governance group has identified someone to take on a full-time position managing KYC. Treasury will begin training that person in the next couple of months, the member said. He expects training to last about six months.

“Until they are fully up to speed and able to handle these requests without treasury’s involvement, I don’t see our KYC workload decreasing”—something that won’t likely happen until the second quarter of 2022, he said.

Before treasury made its proposal, some on the broader team asked what incentive the corporate governance group would have to respond to KYC requests “as quickly as we do,” the member said. “So we’ll have to continue to build that accountability.”

The member also expects his team will need to keep close watch to ensure treasury’s bank relationships are not adversely impacted as the corporate governance group begins communicating directly with banks—something only treasury has done heretofore.