Large companies with multiple subsidiaries are faced with the challenge of ensuring that all of their group is carrying out effective Know Your Customer (KYC) checks as part of their global Anti-Money Laundering (AML) regime. Carrying out consistent and effective KYC can be difficult enough for one company, but when it comes to managing multiple businesses operating in diverse sectors and regions, the challenge becomes exponential.
In this article, we explore KYC-Chain’s Multi-Scope function, which allows a parent company to carry out and track the KYC/AML processes for all of their subsidiaries in one place.
Legacy KYC for Multinational Corporations
Large corporations have for years faced a major challenge of ensuring that their subsidiaries and affiliates — often operating across diverse jurisdictions and industries — are ensuring AML and regulatory compliance through effective KYC checks on their customers.
In the past, legacy KYC processes for group companies usually involved taking a siloed approach, where each subsidiary or affiliate would carry out its own autonomous KYC processes on its clients. This often resulted in non-standardized checks that varied significantly across various group businesses, even if each subsidiary was following KYC procedures delegated by the parent company.
With siloed KYC onboarding, KYC records can be inconsistent and require multiple and regular audits by often-overstretched compliance teams at head offices. It translates to a major drain on time and resources, and also opens up a group company to risks of flawed compliance implementation by individual subsidiaries.
For compliance departments in head offices, keeping track of a subsidiaries KYC and compliance checks has involved receiving reports from subsidiaries on their onboarding processes and checks, carrying out regular internal audits, as well as other irregular measures. Reports from subsidiaries can be non-uniform and contain idiosyncrasies that are particular to their own jurisdictions and industries of operation — making it even harder for a parent company’s compliance team to keep track of.
Multi-scoping: What does it involve?
With a multi-scope workflow, KYC processes carried out by each subsidiary can be ultimately controlled by the parent company, with each process integrated in a single platform — or “instance” — managed and viewable by the parent company’s compliance team.
At the same time, each child company’s KYC processes — termed a ‘scope’ — can be configured individually with high customization, ensuring compliance with local KYC/AML regulations.
KYC-Chain’s multi-scope feature allows each scope to be customized on both the front and back ends. This allows for white label branding and design, as well as the implementation of KYC checks that are specific and unique to each business’ particular areas of operation and activities.
At the same time, permissions are also highly customizable, with the parent manager’s permission to control the functions of each scope being pre configured. In parallel, each scope can only view and process the end users of their own scope, maintaining end user data privacy for each scope.
Case Study: Multi-scope KYC for a Large Global Wealth Management Firm
A large global wealth management firm owns multiple subsidiaries and group firms with a global geographical footprint.
The firm operates investment offices in New York, London, Hong Kong and Singapore, and regularly acquires or invests in businesses in industries ranging from real estate and construction to retail, healthcare and manufacturing.
The group’s KYC/AML compliance previously involved a complex and arduous process whereby each subsidiary was tasked with carrying out KYC/AML checks on its clients and acquisition targets. Although the parent firm issued standardized protocols for carrying out these checks, the diverse nature of each subsidiary’s jurisdiction and industry-focus meant that each individual subsidiary needed to make constant modifications and adjustments to the standard process.
These adjustments needed to be sent back to the head office for approval. The head office also had to carry out regular audits of its subsidiaries’ compliance processes, hiring local auditors with knowledge of each jurisdiction’s specific laws — and run their own KYC on subsidiary clients who raise flags in their own audits.
Enter Multi-scoping. By integrating all of their subsidiaries’ KYC processes into a single platform that the head office has ultimate management and control over, the firm has gained total oversight of its group’s KYC compliance.
This allows its main compliance manager to track and assess the KYC checks of its subsidiaries. It also means that KYC records are uniform and maintained in an integrated, organized and secure platform, easing the burden for both the parent and subsidiary compliance teams.
In summary, KYC-Chain’s Multi-scope feature provides companies with multiple business lines, subsidiaries or affiliates to realize numerous benefits in how they carry out KYC.
Multi-scoping leads to reduced compliance costs by integrating KYC checks in one platform. It also streamlines and makes KYC processes across an organization consistent and uniform — while still allowing for individual customization among each individual scope. Through our feature’s flexible permissions system, approval and configuration roles can be easily assigned to managers across an organization and its various affiliates.
Looking for an effective and efficient KYC solution to use across your organization’s businesses? Get in touch and we’ll be happy to arrange a demo of our Multi-scope feature in action.