Swift, the financial messaging service, is creating a global Know Your Customer (KYC) Registry, a centralized location to collect and share information to help banks vet the risk posed by other banks that handle transactions for corporate clients.
"The registry could give banks information on what parts of the world another institution is processing payments in, or information on what kinds of businesses the bank's clients do," says Luc Meurant, head of banking markets and compliance services for Swift.
The registry is under development and will go live later this year. The service will include institutional information that Swift collects from participating banks. This generally includes the company's name, names of divisions or subsidiaries, geographic footprint, financial product line and other information that reveals a bank's identity, business and general activities in the global payments industry.
Swift will host and manage the registry, verifying the completeness, validity and accuracy of the information provided. Member banks will retain ownership and responsibility for their own information.
"If an institution is processing a payment there is a risk involved from the bank or a corporation. You won't get names of a bank's partners or payment clients in locales like Central Africa from the registry, but you will know the bank is active there," Meurant says.
The service will initially focus on correspondent banks, or financial institutions that conduct business transactions such as payments processing or funds transfers on behalf of another financial institution. The relationship typically involves banks in different countries, which can expose the institution that engages the correspondent bank to third-party risk such as money laundering or payments fraud.
"We're not getting into risk scoring, but we are looking at the completeness of facts," Meurant says, adding the registry will include information from about 7,000 financial institutions that act as correspondent banks.
The Swift KYC registry will not include data on actual payment transactions, Meurant says. "The banks will control how much information they put in and how much they share. So a bank that is using the registry may not get all of the information from a bank they are vetting."
Swift has also created a compliance services unit, which will be led by Meurant, who will oversee a team of KYC and anti-money laundering experts.
Swift has been extending its data management expertise. It recently entered a
"I do believe Swift will eventually have the ability to monitor some transactions, impacting both [anti money laundering] compliance and fraud prevention in very beneficial ways," says Shirley Inscoe, a senior analyst at Aite Group. "However, they are taking baby steps in that direction, starting out with steps such as this one."
The KYC registry will be tough for Swift to build, gain participation and operate, "but this is a great step and will be very helpful," Inscoe says.
While the database maintained by Swift won't enable full KYC compliance, it should streamline efforts of participating institutions and allow them to quickly review legitimate relationships and focus on those that might be questionable, Inscoe says.
