Let's rethink KYC as an enabler of innovation!

If you are a company, wanting to switch your accounts between financial providers, you would know that this can become laborious if you have a complicated corporate ownership structure. The frictions involved in satisfying the stringent Know Your Customer (KYC) requirements during the customer on-boarding application process, particularly with regard to ascertaining beneficial ownership information of a company structure, could deter companies from making the switch in the first place and forgo the benefits of a more competitive solution.

The good news is that the Australian Government is starting to take note of this, and recently closed a submission round on its consultation paper concerning increasing the transparency of beneficial ownership of companies.

What is Beneficial Ownership Information?

It is any information relating to the natural person(s) who obtain a benefit from the shares that they own in a company. When undertaking the on-boarding application process for a new customer,  Tyro must determine whether the customer or the persons with 25 per cent or more ownership or control of the company is politically exposed, subject to sanctions, or present in a foreign jurisdiction that is subject to sanctions. Sometimes, these ‘owners’ are beneficial owners, and this information is not readily available on the Australia Securities and Investment Commission’s (ASIC) public register.

Point being, if Tyro cannot access and certify the beneficial ownership information, then we cannot fulfill our KYC obligations, which may result in a customer missing out on a better deal by deciding not to join with us, due to the frustrations involved.

How do we resolve the pain points in accessing beneficial ownership information?

Tyro has proposed in its submission for ASIC’s authority to be extended, so that beneficial ownership information of companies can be included on its companies public register. To have a centralised register that contains all information, including beneficial ownership, would improve business efficiency and KYC standards for reporting entities such as Tyro.

From a merchant’s perspective, it would mean that you would have one source of truth to store all of your company information and you would not have to experience the ‘back and forth’ conversations with a financial provider’s sales team, who are trying to source information about your company structure that may be difficult for you to locate. A typical example is when Tyro requires a trust deed to ascertain the beneficial owners of a company structure, yet when this trust deed was signed more than 10 years ago and has been through many different hands since that time, it could be difficult for the company merchant to locate it and hence the frictions with satisfying the KYC requirements begin!

The need for a centralised public register

If Australia had a centralised register that contained all information to satisfy KYC requirements, merchants would find it easier to swap between financial providers, which would in turn increase competition within the market. Its a win-win for merchants and financial providers alike.

In the coming months, hopefully we will see a push by the Australian Government to prioritise making all company information publicly accessible. Merchants need this so that they have choice in who they choose to bank with and financial providers need this so that they can seamlessly abide by their KYC obligations without having to encounter the current frictions being experienced.

Adhering to KYC obligations is not just a box-ticking exercise for reporting entities. Adding beneficial ownership information to a central ASIC registry would remove compliance costs and switching frictions that stifles innovation and competition. It would also bolster the integrity of our financial services market, which would benefit us all.