Singapore • Singapore has put on hold a plan for banks to share information on their corporate clients, after the cost of the project exceeded expectations, according to the country’s financial regulator.
The Monetary Authority of Singapore (MAS) won’t meet its original target of having a so-called know-your-customer (KYC) utility up and running as soon as this year, according to MD Ravi Menon. By sharing information, the KYC utility is supposed to make it faster and cheaper for banks to open accounts — a process that has become increasingly expensive and burdensome — and to improve their ability to detect money launderers and other blacklisted entities.
“The stumbling block turned out to be that the set-up cost of this utility exceeded the savings that the banks would be able to get,” Menon said in an interview this week. “So, short answer, we have not succeeded.”
KYC rules have their roots in the US Patriot Act following the Sept 11, 2001, terrorist attacks, and have led to ballooning costs for many financial institutions. Singapore’s banks aren’t alone in trying to find a more efficient way of complying with the requirements — the biggest Nordic banks in June banded together in a joint KYC project.
Menon said the MAS and the participating banks are reviewing the de- sign of the KYC utility after shelving an arrangement with Thomson Reuters Corp’s financial and risk arm, now known as Refinitiv, which was one of the firms working on the project. He declined to disclose cost estimates for the KYC utility, though he said they were meant to be shouldered jointly by the MAS and the participating local and international banks. Those proportions have yet to be decided, he said.
“Now we are in the process of reviewing — so what is it about the architecture that it is so costly, that it overwhelms the savings?” said Menon. “This project is not dead. It is in coma. We will learn from the experience, rewire the architecture, and do our best to get it up and going again.”
Conducting due diligence on an individual corporate client can cost “several hundred” Singapore dollars and is more expensive than doing KYC checks on individuals, which cost somewhere between S$70 (RM211.23) and S$100 per customer, Menon said. When assessing a company, banks need to go through as many as 90 data fields to ensure the firm isn’t on any blacklist, has legitimate sources of income and identifies the ultimate beneficial owners, he added.
More than 300,000 companies were registered with Singapore’s Accounting and Corporate Regulatory Authority as of August.
A spokesman for Refinitiv declined to comment on its discussions with the MAS, but said the firm believes that a utility project could be viable. “A banking KYC utility could be a transformative project for Singapore, with the potential to bring down costs and time taken to on-board new customers for banks,” the firm said in an emailed statement. “As such, we believe there is a strong case for adopting a shared utility in the jurisdiction.”
Bloomberg LP competes with Thomson Reuters and Refinitiv in providing financial news, data and analytics.
A related KYC project for local banks to access government data on individuals when deciding whether to open accounts has been successful, Menon said. Oversea-Chinese Banking Corp Ltd, Singapore’s second-largest
bank, said in June that Singaporeans and permanent residents can open a new account quicker, now that it is using the government database, MyInfo, in addition to its own verification process.
Learning from mistakes is an important part of the entrepreneurial culture Singapore is trying to build, he said. “You have got to try, and then some of these experiments won’t work out, because the economic works out differently from what you initially thought,” Menon said. “And then you try again, you learn from that experiment.” — Bloomberg