Citibank and how KYC can Impact your Financial (and entire)Life
It started with a weird experience. My JetBlue credit card bounced. Weird, because I always pay my bills through Citibank online.
Citi Gold has always been my go-to banking account and I honored it. I pay my utility bills, my credit cards, car payment and just about everything that allows my life to move smoothly. It is my source of cash through my Citi debit card, and it is my facilitator for real estate transactions. But then…it stopped. Completely. Unrelentlessly. It stopped payments to vendors. It told my Jet Blue card (issued by Barclays Bank), to scratch. And that has meant that most of my shopping and subscriptions have ceased. And I suspect that my credit rating has nosedived to depths that will take a very long time to rectify. All because of something called KYC.
What is KYC?
KYC is an acronym for “Know Your Customer”. But do Big Banks really know their customers? As a client of Citi Private Bank, I thought so. Yet when a situation like KYC occurs, all bets are off. Combined with non-collaborative and differing KYC processes across the industry, this is contributing to significant client frustration levels.
Know Your Customer (KYC) remains a central focus for banks and financial institutions as they look to reduce onboarding costs, improve client experience and stay compliant. KYC challenges for banks and financial institutions include poor client experience, a rising cost burden, and the risk of reputational damage from a compliance breach, as Citi suffered in 2017, when drug smugglers were using the bank to sneak dirty money into the United States from Mexico.
As a customer, I would imagine I left a pretty large digital footprint of information over the years. More recently, AI and machine learning, often with cognitive abilities, have been widely employed to make sense of undefined data and to find patterns that pinpoint potential risk. So, what does this really mean for the customer?
In May 2018, a new rule issued by the Financial Crimes Enforcement Network (FinCEN) required financial institutions in the U.S. to identify and verify “Beneficial Owners” of entities when opening new accounts, unless they fell within certain recognized exceptions under the rule (see FinCEN’s Final Rule and FAQ). Citi was tasked with the need to collect:
- Both date of birth AND residential or business address; and
- A Government-issued identification number (for a U.S. person, a Social Security Number)
That’s simple. Especially when it’s honestly, me. But data quality also remains an issue. Many FIs struggle to access a single golden source of information that can enable them to develop a holistic view of each client. The problem is, banks seem to draw a thin line between customer relations and transparency.
According to sustainability data on Citibank’s Impact Values on UnifyImpact, Transparency has the lowest score at 4.0. Sign onto the UnifyImpact app to learn more.
So, what really constitutes a KYC investigation? Bank accounts are frozen for a number of different reasons, and each reason requires specific actions to unfreeze it. Banks have the authority and discretion to freeze accounts if they suspect account holders are conducting illegal activities. Banks routinely monitor accounts for suspicious activity like money laundering, where large sums of money generated from criminal activity are deposited into bank accounts and moved around to make them seem as though they are from a legitimate source. Suspected terrorist financing is also another reason why banks often freeze accounts. And, according to Citibank’s relationship managers, every so often, routinely. For no reason.
This is pretty perilous stuff and sounds more like the back cover of a crime novel. Except there is no hero detective in my case. And I’m still waiting to become unfrozen.
