Lessons from the National Bank KYC mess

In the past two weeks, it was a nightmare for one to visit service centres of the Malawi Stock Exchange-listed National Bank of Malawi (NBM) plc as the banking halls were congested with desperate customers seeking to update their Know Your Customer (KYC) details.

The situation worsened on Monday, July 10 2023, the deadline for the exercise. It was heartbreaking to see viral videos of customers scrambling to get into the bank’s Mzuzu Service Centre for the exercise. Equally, bad sights were noted in Blantyre and Lilongwe where congestion was the order of the day.

In the end, the bank had no option, but to extend the exercise to August 31 2023. Perhaps, there will now be some breath of fresh air.

Banking is one highly-regulated industry the world over with regulators closely watching their operations to ensure maintenance of standards and to avert fraud or money laundering.

In an ideal situation, KYC should not be a complicated exercise or process that gives customers and banks alike sleepless nights. For instance, every time one undertakes an over-the-counter transaction, there is a KYC aspect as there is always verification of the identity either by way of one-time-pins or national identity (ID) cards.

The best moment to capture KYC details is during the opening of bank accounts. It is here that banks ask their prospective customers to submit requirements such as utility bills, proof of residence, ID, source of income, registration in case of corporate entities and the like.

In compliance with anti-money laundering laws, commercial banks are required to undertake KYC exercises periodically. Many times, customers are required to update their details where there are key changes in residential or business addresses, contact details or otherwise.

From past experience, the KYC exercise is one tedious exercise no customer wants to undergo. But then, it is a regulatory requirement that cannot be avoided.

Despite the banks doing their best to tick the KYC boxes, it still happens that some accounts are opened with shortfalls in terms of details. There are also those customers who do not care to update their KYC details, but, ironically, I understand that the regulator, the Reserve Bank of Malawi (RBM), stops commercial banks from closing or blocking transactions on such accounts yet the same regulator imposes fines on banks for non-compliance.

The ongoing KYC exercise comes hot on the heels of revelations that some five women were found in possession of 338 automated-teller machine cards (ATMs) which were pre-loaded with foreign exchange they spent in Dubai in the United Arab Emirates. The case is currently in court so I won’t comment further.

What lessons can be drawn from the KYC mess at National Bank?

To me, communication tops the list. The bank failed to effectively communicate to its customers and other stakeholders. Communication is said to be effective when the receiver, in this case customers, receives and understands the message with clarity and purpose. It was only after the “remedial statement” that announced the extension of the period for the exercise that customers and stakeholders understood that only those who had not updated their details in the past three years need to take part. This should have been done in the first announcement, not the firefighting the bank later engaged on social media in trying to clarify.

Data capturing could also have been done better. The bank said there was an “online” arrangement where customers were required to fill forms, scan and e-mail to various service centres. However, there was no auto-reply to acknowledge receipt, a situation that prompted some to physically go and queue. Besides, how many have access to such facilities?

In the digital era, the bank could also have created a portal where customers, with access to the Internet, would log in and update details. Considering access to the Internet is low and data charges on the higher side, the bank could also have arranged some computers manned by temporary staff or outsource technology experts to assist customers fill the data.

I understand other banks were also undertaking the exercise, but specifically targeted customers whose details were lacking. That is another smart way to do it.

KYC is an important exercise that cannot be avoided by both customers and banks. To make it a success, RBM should allow banks to block non-compliant accounts and, at the same time, the banks should also take the KYC seriously by ensuring total compliance by customers. There should simply be no shortcuts as some recent events have revealed.