AML / KYC

The Challenges for Offshore Banks Onboarding China’s HNWIs

Digital onboarding solutions can help banks find the right balance between providing a superior customer experience, guaranteeing AML compliance and improving internal efficiency when onboarding Chinese HNWIs offshore. 

According to a recent study, privately held investable assets in China surged to CNY165 trillion (USD25.3 trillion) over 2015/16, and are expected to grow 14 percent this year to CNY188 trillion. Furthermore, China is now home to more than 1.5 million HNWIs (high
net-worth individuals).

Much of this wealth is finding its way overseas, as exemplified by the growing number of Chinese financial institutions establishing an offshore presence to serve well-off expats.

“When you have half a billion wealthy individuals, you need to have expertise to manage that wealth,” notes the Head of Compliance at a top Hong Kong bank. “Many Chinese clients are interested in diversifying their exposure and will be going to private banks to see how they can achieve this, and move some of the money away from prying eyes and prying hands.”

But, to compete in this crowded market, offshore private banks and wealth managers wanting to onboard Chinese HNWIs must guarantee compliant AML (anti-money laundering) due diligence and at the same time, provide efficient onboarding that creates a positive experience for potential clients.

Reaching this balance is not easy, given onboarding is the first stage in setting up a solid and trusted relationship with a new client, and failure risks losing him and, consequently, missing future business opportunities. According to the Head of Compliance, onboarding simply takes too long, with some complex cases taking up to a year – straining the financial and temporal resources of private bankers, wealth managers, and their clients.

The long period of time clients have to wait to access an account is not the only onboarding pain for them. Another issue is that, during the first meeting with their relationship managers, clients might not get clear requirements on the information and evidence they have to provide to the bank and the steps they must perform to reach the contract signing stage.

This can result in many follow up meetings and calls to collect new documents or missing data, putting pressure on clients to retrieve unexpected and large amounts of information in a short time. Customers lose time and experience stress, also because very often they cannot send or sign documents digitally, or perform online identification to be recognised remotely, forcing them to take multiple trips to a bank branch.

At the same time, relationship managers can be frustrated by having to spend a lot of time re-contacting their back office to manually check which documents are missing or which information is wrong, and which contracts need to be signed by clients for a specific situation, rather than using the time to provide advice or other valuable services.

This unstructured and non-transparent onboarding process can be exacerbated by the fact that simple things, such as proof of address, aren’t a common concept in China. Addresses on national ID cards can be outdated, so clients often provide utility bills as evidence, for example. In this context, banks need to have flexible processes that allow collection and processing of different types of documentation during onboarding to meet customers’ needs and expectations.

Offshore private banks and wealth managers also need to consider psychological and emotional aspects when dealing with mainland Chinese clients, who can be particularly unenthusiastic to share confidential information required by their bank, for example about the sources of their wealth.

“They can be very reluctant to provide us with any document,” suggests the Head of Compliance. “Recently a senior Chinese official provided us with a payslip but had ripped off their employer details. There can be an attitude of not understanding why we don’t trust them.” But, most of the time, such suspicion arises from the fact that relationship managers appear to ask random questions in a random sequence during onboarding, not following a guided, straightforward process with clear steps. The customer interprets this disorganised, improvised approach as intrusive behaviour and thinks the bank asks for so many private details because it doesn’t trust them.

Other challenges banks are facing are that the existing information they own is of poor quality and poorly maintained, according to the CRO at a top Swiss private bank in Singapore. “We haven’t really enforced, over the last 10 or 20 years, discipline in terms of providing data and maintaining that data,” they explain. “We have a lot of rules in place that say you have to do a parallel review every year, or every second year. But, the question is: what is the quality of that review?”

And what about compliance changes and adhering to regional regulations? Overseas banks need to ensure their Chinese clients are fully compliant with regional regulations and tax laws but provide an outstanding onboarding experience at the same time.

Integrating compliance checks directly into the onboarding process can help manage this challenge. Structured questions can be processed in real-time by the compliance officer, which speeds up onboarding and quickly informs clients about any barriers to the process.

Banks can build this collaborative and transparent process by implementing digital solutions that streamline and orchestrate information across departments and stakeholders. Digital solutions support internal collaboration and allow banks to connect with their external ecosystem of clients, regulators, fintech (financial technology) providers, and third-party services.

For over 13 years, Appway and its portfolio of innovative solutions have supported global and regional wealth managers as they digitalise their onboarding processes.

Indeed, automating and digitalising onboarding enables banks to continuously adapt to compliance changes and be proactive in AML checks, while providing an outstanding customer experience to their Chinese clients and achieving greater internal efficiency.

A single, straightforward and guided process, with clear steps to follow and precise questions to ask at a specific moment in a client relationship, is an enormous help for relationship managers, ensuring they ask and get the right information in addition to checking in real time if something is missing or inconsistent. At the same time, customers experience excellent onboarding, overcoming their diffidence, thanks to a structured and logical flow, and transparent ‘joined process’ with clear visibility on the steps and why they must provide evidence. This can end the frustration of coming back for multiple follow ups since relationship managers know exactly what documents to provide.

Internal efficiency and better customer service, fundamental to being competitive in APAC’s increasingly challenging private banking and wealth management space, can also be improved by orchestrating data across departments and services. For example, document workflow can be managed much more efficiently through automatic identification and selection of the right documents clients should sign based on their case. Internal collaboration can be boosted too, since compliance officers, operations departments and top management are involved in this ‘end-to-end’ onboarding:

  • All needed regulations are implemented and integrated into the process (sometimes also at the prospecting stage). Local variations in the global and standardized process can be implemented to adapt to the specific regulations of each country, ensuring all compliance and AML standards are met;
  • Back office has a clear view on tasks and priorities via an internal portal, and they have more time for value-adding activities by automating manual checks or data entry; and
  • Top management has a full overview of bottlenecks and performance through
    management dashboards, improving business results because of better monitoring.

But what is more important for offshore private banks in onboarding Chinese HNWIs is that digital onboarding solutions enable them to always keep their clients at the heart of the process, adapting rapidly to new needs or responding faster to upcoming requests, integrating with external services to deliver an inclusive, superior service.

Digital solutions allow cross-channel interactions, letting customers choose the preferred channel of engagement with their bank (physical, digital or both), and provide a consistent user experience regardless of mode of interaction. They can use chat to modify their data, digital signatures to sign contracts and video identification to be recognised remotely. At the same time, they can arrange an in-person meeting for a more intimate dialogue with their relationship manager, who will have all the required information about their client on a tablet – accessible any time, anywhere – thanks to the mobility, accessibility and openness allowed by Appway’s digital solutions.

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This sponsored article was produced by the Regulation Asia journalists in conjunction with Appway.

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