Auditing firm, KPMG, urged financial institutions to channel more funds towards the automation of certain aspects of the Know Your Customer (KYC) process.
This was stated in its report themed, “KPMG 2021 Know Your Customer (KYC) Survey: KYC Challenges and Opportunities in Nigeria.”
“We would like to encourage more investment in the deployment and adoption of artificial intelligence, machine learning and robotics to automate certain segments of the KYC process, so as to build more efficiency, accuracy and predictive capabilities in the KYC process,” the report said.
It noted that financial institutions in Nigeria spent billions of naira yearly on their KYC exercise, a mandatory process instituted by policymakers in the country to contain the flow of illicit funds.
In its analysis of the amount dolled out by Nigerian banks, KPMG stated that the sum of N400 million is spent on the KYC process, depending on the institution’s size.
The report said, “Our analysis of the data reveals that for many banks, the direct cost of KYC is below N50 million per annum, but depending on the size of the bank it can rise to as much as N400 million per annum, which do not include the indirect cost of KYC.
“Banks also incur significant indirect cost in performing KYC that include cost incurred in staffing the compliance office/sanctions screening desk, purchasing, installing and implementing technology, storing and managing customer KYC data, cost incurred due to regulatory reporting, fines incurred as a result of failure to report, opportunity cost incurred as a result of customers who are discouraged from opening accounts due to inefficient or cumbersome KYC systems.
“Due to the current manual nature of searches at the Corporate Affairs Commission (CAC) as well as continued existence of jurisdictions designated as tax/secret havens – it is difficult for banks to unravel complex legal structures, especially where these complex legal structures are employed to mask true or ultimate beneficial owners.”
It encouraged regulators and banks to devise ways to address the attendant challenges in conducting the KYC exercise “while not compromising the integrity of the financial systems.”