Treasurers lash out over compliance burden
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Treasurers lash out over compliance burden

Corporate treasurers reveal the impact of compliance on their day-to-day operations – and how it is affecting their relationship with banks.

At the UK's Association of Corporate Treasurers' (ACT) annual conference last week, treasurers discussed how the burden of know your customer (KYC) and know your bank (KYB) regulation was hindering them from effectively completing their daily operations.

Regulatory demands for more onerous KYC checks mean banks now take a long time to engage with clients.

“The levels of KYC checks that need to be completed are presenting a massive barrier to effective functioning of acquisitions,” says James Kelly, group treasurer at AB Ports.

“There have been situations where the banks simply can’t complete the KYC in time. In a previous role have experienced acquiring a company, only to find it does not have functioning bank accounts because the bank had not been able to complete the checks in time. In the end, we needed to put up LCs on behalf of the company. Doing all of the checks is a substantial overhead in both time and money. It is not the way to go in the long term.”

Another treasurer explains that in the past the company had completed its necessary KYB checks, but the bank had still lagged behind in completing its KYC requirements. Jane Pilcher, group treasurer, Anglia Water, says: “Managing KYB and KYC checks are time consuming. We look at the banks and choose them not just based on the credit ratings but on their overall services and offerings. These relationships, and credit ratings are now being reviewed at least  annually.

"The American banks are very challenging with KYC checks."



 Greg Person, Kyriba

Treasury software provider Kyriba and the ACT’s joint The Changing Role of the Corporate Treasurer 2016 report found that there were substantial regulatory hurdles for treasurers to overcome. For small companies with revenues of under £100 million, regulatory compliance was cited by more than 40% of respondents as being one of their biggest risk factors.

Despite the expanding workload, treasuries' team sizes were still small – 10% of companies have a single person managing all treasury functions. And 42% of companies have between two and five members of treasury staff. The report further found that it is only when a company has revenues of £10 billion or more that over 50% reported having a treasury of five people or more.

Because of the human-resource challenge, treasurers have to lean harder on technology and their banks to help them to wade through the growing compliance burden. Greg Person, vice-president, global pre-sales, at Kyriba, says: "Technology clearly plays a vital role in helping treasurers do more with less. Given the mission-critical deliverables treasury must execute each day, they simply don’t have the luxury to put these core duties on hold while they implement additional regularity compliance procedures and reporting.

"Therefore, by leveraging their banks' expertise, consulting with treasury advisory firms, and partnering with technology vendors who specialize in regulatory compliance, the treasurer can greatly reduce the burden and stress on his team as they comply with these new regulations."

Peter Matza-160x186


Peter Matza, ACT 

Peter Matza, engagement director at ACT, agrees that using technology has helped to alleviate some of the issues: "Some TMS systems have increased functionality to help with Emir [European Markets Infrastructure Regulation] reporting and other providers have changed offerings too (for example, in audit reporting) and treasurers have also worked hard in streamlining areas of their activity such as bank account management." Complying with requirements is a big burden for very small teams. To open a new bank account, corporates might need to provide the passports of signatories; the names, addresses and dates of birth of directors; utility bills and bank statements for authorized signatories; and further documentation relating to the tax status of the company and its Emir status.

In turn, as a result of the signatories’ data concerns, correspondence is often conducted physically, rather than via email, which further delays the on-boarding process.

When asked about the top-three factors affecting treasury departments over the coming year, 29% of corporate treasurers surveyed in the report stated difficulty in complying with regulations or inability to do so.

In order to ensure they meet compliance, Person says the treasurer should be proactive in asking their bank for help: "An effective step is often regular communication, where the treasurer holds quarterly meetings with his main banking partners to review the treasury department's key objectives and projects. Following these effective meetings the relationship banker can then integrate its appropriate colleagues to assist the treasurer on these relevant challenges, such as compliance initiatives. Similar sessions between the treasurer and consulting practices, technology vendors, and peer networking can ensure the treasurer stays ahead of upcoming regulatory workloads, and proactively develop compliances workflows and technology strategies."

Questioned on what their three biggest priorities for the year would be, 25% of treasurers stated it would be complying with regulations such as Single Euro Payments Area (Sepa) and Emir.

Although Sepa has been in place for over a year, Person says it is still causing problems: "We still see smaller organizations incurring additional expenses as they respond to these new standards. This includes outsourcing elements of compliance reporting preparation due to the lack of integrated technology or, in the case of Sepa, companies continuing to use urgent payment types as opposed to low-cost Sepa credit transfers due to inefficient payment workflow and cash-positioning decisions, and inadequate payment technology to streamline XML payment files to their banks."

Matza says that the regulations that are still in the works could cause further trouble for treasurers: "For example, UK bank separation [of retail and investment banks, in 2019] is still not fully communicated by banks or legislators. In general, regulators in the EU have often been slow to respond to the concerns of non-financial corporates on matters such as Emir or collateral/margining. Some recent steps to widen their engagement have improved the picture.

Some treasurers are also concerned that their banks do not look at KYC from a treasury perspective and fail to consider the amount of time it takes their small teams to complete. Matza concludes: "In KYC, treasurers are very clear that the regime has been poorly handled – too many competing platforms, inconsistent bank information."

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