The Evolution of KYC in Treasury

Transcript of Webinar  

Ernie Humphrey[00:00:00] Hello, everyone. I'm ErnieHumphrey, the CEO of Treasury Webinars. Thrilled to welcome you to our webinar today. This webinar is the first in a series of webinars that I'm partnering on with Avallone around the topic of KYC, what we've always come to note in Treasury as a Know Your Customer, and there's just an awful lot going on in this arena. The view is shifting to Know Your Counterparty. So today, what we're going to do is - we are going to have a view. We're going to look at where we've been as far as how most people see KYC and then how that has beenevolving. So it's almost like, whether you like it or not, you're going to haveto have a counterparty perspective because what. You will see if you haven't seen is your banks are asking you about your suppliers and your customers. So even if you thought you were overwhelmed with giving them information on your own company, you're going to start to get that and what I think is going to happen is the SEC reporting and other things are going to start to require that require that analysis as well. 

‍Ernie Humphrey[00:01:06] So before we dive in, our first webinar here is evolution of KYC and treasury a compliance tasks. I was going to say annoying task but I gotta be nice to the banks. Uh, to strategic risk management, I'm thrilled to have here with me today. My panel we're not going to have slides - we’re just going to have conversation today, folks. Sofirst, I'd like to welcome, Sune Warberg Clausen, he is the VP of financialcrime prevention at Avallone. So Sune, give us a little bit about yourextensive and amazing background in this arena. 

‍Sune Warberg Clausen[00:01:41] Yes and thank you. I'm Sune, and I'm responsible for our financial crime prevention services and our customer success team at Avallone. I have been working for Avallone for nearly five years now, being a part of building up this amazing company. Before that,I had 23 years in one of the largest banks in Denmark, Danske Bank. 

‍Sune Warberg Clausen[00:02:05] And the last 10 years, Iworked with operational risk and compliance risk. At the end of my tenure, Iwas SVP and group responsible for our reporting, so that's my background. 

‍Ernie Humphrey[00:02:18] Thank you very much. Soonbefore I forget, to mention, there is a lot - there is a lot of amazing blogsand information on the Avallone website, and especially on the on the fraudcrime prevention front, Sune has some amazing blogs. So I encourage everyone totake a look at that content, as well. Also, with us, honored to have Lee-AnnPerkins, she's the Assistant Treasurer at Ankara, and she is an inspiration tome on how you can give back to the treasury profession. So Lee-Ann, why don'tyou give us a little bit about your background, and just give us a littleteaser about what you're thinking in this area, and maybe a little bit aboutthe conversations you and I have had recently. Sounds great. 

‍Lee-Ann Perkins[00:02:58] Hi to everyone on thecall, and hi to soon, and only. Thank you for having me. It's good to be ableto discuss such an important topic. I have about two decades of treasuryexperience on the practitioner side, and what I will say at this point is thatI'm still in the learning phase of my career. I am very happy to get theopportunity to talk to others. and to learn from top-tier talent like soon -with your background in financial crime, I think that's really important forthis conversation today, and I think also that the Treasury Department has suchan opportunity to positively impact our companies. It all starts with justmanaging the risk. As only said, my name is Lee-Ann Perkins. I am the head ofTreasury for a global company that operates in many complex countries aroundthe world. So that being said, it means I see the word KYC and counterparty alot. 

‍Lee-Ann Perkins[00:04:01] More about my truthfulreaction to that later. In the meantime, I am an advocate for the professionand the advancement. Of the industry as a whole and I really look forward tothis session because it revolves around the discussion of risk and its associationwith KYC and our counterparties in general. I think we've had such greatdiscussions only lately on what is KYC and what is the role of Treasury inensuring we are managing the risk for our companies. And it is, and everyone onthe call will agree and has dealt with this from time to time, that KYC is avery time-consuming, repetitive, cumbersome task. However, it is essential. Sowe must know what the purpose of KYC is. In order that we can put in the effortinvolved to give the banks what they need to ensure who they're dealing with isnot a risk to the bank. 

‍Lee-Ann Perkins[00:05:04] And at the same time,on the counterparty side, companies must make sure they know who they aredealing with as well. So, despite the frustration and the efforts involved,it's still a process that should be respected from the treasurer'spractitioner's point of view. 

‍Ernie Humphrey[00:05:22] All right. Thank youvery much, Lee-Ann. I just want to give everyone a little roadmap for ourconversation here. We have already talked a little bit about KYC and Treasury.I'm going to do a very brief overview of what we normally think of as KYC. Thenwe're going to talk a little bit about the challenges of what we normally thinkof KYC. Then I'm going to let Soon share with us how there are some solutionsout there, relief, automation, and AI, the role that that plays. Then we'regoing to talk about the evolution of KYC. So I call that nuisance tocounterparty risk mitigation, and then we're going to look back at these painpoints. And then we're going to talk about how they're even more magnified whenwe change our perspective. Soon, we're going to share with you how technologyis available to help us really own this role. I and I want to say what I've seenfrom my research is the reason that treasury gets called the strategic tablemore than anyone ever talks about is risk mitigation. That's where we have it.And this is a place for us to make that impact. 

‍Ernie Humphrey[00:06:25] So before we reallydive in, I want to just level set a little bit, everyone. So I'm going to goahead and launch a poll here. I just want to get a sense of where everyone isat in terms of how involved you are in collecting and managing KYC-relatedinformation. So if you can just take a second to answer the polling question,I'd appreciate it. and when I was in Treasury, I didn't really realize it, butI was very involved on this side. I was the hub of the company information. Sowhen Legal and MA wanted things, they would come to me. Another part of KYCthat I have come up with myself is like, know your company. So you also becomethat resource in working with Legal and Tax. And guess what? That helps usbecome a trusted advisor to Legal and Tax, and the CFO and the Board ofDirectors as well. So I'll go ahead and leave this up for just another fewseconds or so. Again, I just want to level set to give our conversation somecontext and see where we might focus a little bit more to be in tune with ouraudience. 

‍Ernie Humphrey[00:07:29] So I'm going to giveyou guys a couple more seconds again. I appreciate it. Let's go ahead and clickon the poll. So let's go ahead and close the polling question here. There'ssome latency here. So give me five, four, three, two, one. All right. Let's checkthat out. All right. Let's go ahead and take a look at the results here. Sowhat we see is providing information to banks and that's 26 and I'm glad to seethat that's uh a little bit lower. So we're seeing that people are evolving. Sowe have almost half provided information to banks and other counterparties. SoI'm glad to see that requesting information and providing informationinternally beyond treasury, right? So interesting. So I'm glad to see thoseresults. Lee-Ann, does anything stick out from those results to you at all? 

‍Lee-Ann Perkins[00:08:26] Yeah, I mean, I wouldagree with you in saying that it's important to see that counterparty risk isbecoming more internal to the Treasury Department, because, like you alluded toearlier, when we started our Treasury careers, it was very much about the bankand our risk to the bank. But now it's about not only the bank's risk, but ourrisk as vendors and suppliers as well. And I also just want to pin offsomething you said earlier, Ernie, is that in the Treasury Department, as Ihave seen it evolve over my 20 years of experience, we are not just thatdepartment that is interfacing with our stakeholders internally, like youmentioned - tax, legal, and audit - but we're so much more of a front-facingdepartment these days. Where we deal so much a lot of our time is dealt withour banks, our shareholders, our rating agencies, our customers, even. 

‍Lee-Ann Perkins[00:09:29] And it's thatrelationship, along, coupled with our internal stakeholders, that provides thatstepping stone for us to become more strategic as we operate. So happy withthese results, I think it's what I am seeing as a practitioner and what I seein the industry as well. And glad everyone 

‍Ernie Humphrey[00:09:46] is managing the riskthat's coming to us as companies great and soon I’m going to get your thoughtsas well but I also would like you to maybe comment on have you seen theconversations with companies changing especially given 2025 and all thecounterparty risk that's been going on with compliance and regulations have youseen that shift that KYC to kycp shift at all have you seen that trend yet yeahdefinitely and I think this shift from its only the banks that was a part ofthis KYC request to that is also other counterparties I think that's somethingwe have seen a lot and we have actually seen it just growing 

‍Sune Warberg Clausen[00:10:28] Over the last years, I also see that it's kind of a start to being a bit more focused on other stuff in the KYC. So where before it was mainly on who was controlling the companies and the basic information, I think we also see more and more extended questionnaires that are asked. So involvement in the area. 

‍Ernie Humphrey[00:10:55] Okay. Thank you very much, Sune. So let's go ahead. Uh, let's go ahead and just start, kind of at atop level, so KYC basics. There's really uh three main areas we're going tohave some acronyms here, so hopefully they aren't too bad. So it's - we usuallystart with a CIP, right? And that's really just the main thing. The date, theinformation, just the know that companies exist and they're out there. Then, wego to the their customer due diligence, which is getting a view of thefinancial health of the organization, just right there. Then, enhanced duediligence is really on the monitoring side, right of that health. So, to me, Ithink we've had this limited view where we are focused on the CIP side a littlebit. And then, Sune, I want you to go ahead and give me color around youroverview, and then share, especially on the CIP side, how that's just not agiven anymore in the fraud and all that stuff. So could you help me out with abetter overview there? 

‍Sune Warberg Clausen[00:11:58] Yeah, so first of all,I think KYC today is much more than CIP, right? So it's definitely going moreinto... the due diligence part and enhance due diligence, especially if you arein certain industries and operate in certain countries, right? Then you wouldmeet more and more qualitative questions in your KYC processes. 

‍Sune Warberg Clausen[00:12:20] I think the whole CIParea is something that is going to be challenged in the coming years becausewith what AI can do now, already now and we know maybe already tomorrow theycan do so much more, right? So I think that's a huge challenge with how easy itis to make a passport that looks exactly like a true passport and stuff likethat. I think it pushes a bit to the way that many companies are doing ittoday, especially when it's from business to businesses. Uh, I think there'sstill kind of a trust between businesses that that helps on this, but Idefinitely see that there will be a an escalation on how to identify peoplegoing forward. So, the company house in the UK they kind of now wants all thesenior people and the ups to go in and get certified to see, you know, online with passports or by my professional. I think we would definitely see a big change in how we share. 

‍Ernie Humphrey[00:13:29] I mean, I was just it'samazing. So, but we'll dive into this later. I always like to give the preview.So, we're talking about right now, CIP and fraud, there in all these threeareas, but then we also have to look downstream. So, now we've got we're lookingat our counterparty, but what about their counterparty and what aboutcompliance and where are these goods being shipped from and how do I knowthey're not going through a pass-through so I'm not violating things. So, Ialways like the headlands, like, no, not yet, like 10 minutes, okay. Lee-Ann,give me your chance. You hear KYC? What's your what's your reaction when I say KYC?What's your emotional reaction? 

‍Lee-Ann Perkins[00:14:14] Truth I said I would betruthful in the opening. So when I get the emails for KYC, I definitely sigh.To be honest, it makes me feel frustrated because, despite all of our work overthe years, the process is still so largely manual. It's exceedingly repetitiveand it's oftentimes disconnected between banking partners, but also between onebank in different geographies. and it to be fair though it's not just thetreasury practitioner that struggles here our banks do as well and I had abanker once tell me that for him KYC meant kill your customer no furthercomments on that but you know at the same time it is a very responsible taskand for the most part the treasury professional is ultimately accountable forthis information so we have to take it seriously as I said earlier we have tounderstand the purpose of KYC and that being said that it protects thefinancial system prevents fraud and ensures compliance we do have to take itseriously we have to invest time 

‍Lee-Ann Perkins[00:15:26] and effort into it butwe're begging for a solution we're begging for automation and for a way to makethis an easier and less time consuming task for the practitioner. So we'rewaiting for that to come to fruition from our banking partners and vendors andcustomers like Avallone. 

‍Ernie Humphrey[00:15:46] Yeah, I mean, those arethe pain points that you've kind of touched on. You're getting requests frommultiple banks for different information from the same bank's information. Youdon't know where to get the data. It's manual to pull the data together. and inuh and you just don't have a lot of support; it doesn't get a lot of internal Iwould say love right about the whole thing. 

‍Sune Warberg Clausen[00:16:12] so student she teasedyou up perfectly I shouldn't have jumped in there so share with us what isthere what are some of the functionality in in the solution that you guys havedeveloped that will help with these start to get us where we can lessen ourokay thanks definitely so first of all I think um Avallone was kind of foundedto help out on these issues. 

‍Sune Warberg Clausen[00:16:40] I, myself, have workedin the bank. Our founder and CEO, Anders Meinert Jørgensen, was head ofcompliance in Denmark. and what we saw was that, internally in the bank, theywere struggling with handling all the KYC information, but also the inputcoming from the companies was quite... Quite bad, right? So it was kind of adouble struggle. So customers annoyed about it, and at the same time, thequality coming in was not very good. So the whole uh start of Avallone was thatwe have to fix this. If the companies can't deliver quality data to the banks,they will never solve the problem. The banks can't solve it themselves, so thecompany to also do their part of it. So the idea with Avallone platform is tohave one place with all your relevant KYC information. It's a secure place,it's a place where you can share it from, but also a way to kind of decode thequestionnaires from the banks because it seems like every bank has differentquestions. But if you really start mapping it up and try to look at thedifferent ways they have the languages - uh, truly, 80 of the questions istotally the same. So what the Avallone does is kind of decoding that and giveyou suggestions to how. So what the Avallone system does is decoding thequestions that get from banks, so you can reuse questions from a formerquestionnaire that you have used. So when you first get started, you have datain the platform, you can reuse it across banks. And what we have seen for customersis that they kind of can 5x that they can spare five times the time thatthey're using on it on a case right so if you use 50 minutes in the case beforethey can do it in 10 minutes with technology right so there's a lot of time tospare and to be honest I think maybe even more important than a lot offrustration to spare because you just want it off your disc right so I know youguys have been having conversations uh with banks – Anders in particular, our CEO- what are what are you seeing and I’ll let Lee-Ann see what she's been hearingwhat do you get as a general sense do you feel that banks are looking to investin making this easier it's just not a priority or where do you do you give us asense of what you have seen heard from all the conversations that you've beenhaving with banks And, you know, 

‍Lee-Ann Perkins[00:19:29] As I do this often in aglobal company, the banks really want to make this easier. You know, it's not afun process for them either, for the most part, but their hands are tied mostlybecause of the regulatory requirements and the risk policies that a bank has.And I agree with what Soon just said. It is for the banks; they let me knowthat it's this inefficient transmission of data from the companies. That's achallenge for them because. We don't always you know, follow the rules byentering every single piece of required information up front and doing the workthat the bank requires of us. So it's a challenge for both sides. It's verymanual, it's an inefficient system. So the banks want to make it easier. Thereare many banks, one global bank in particular that I use. That bank has beensharing explored, has been exploring shared KYC utilities, and they do have adedicated portal where you can upload information. 

‍Lee-Ann Perkins[00:20:30] They save the data fortwo years. So if they refresh the KYC, they have a lot of the data on hand andthey actually tell me which number in the document needs to be updated. I don'thave to redo the whole thing. So while the banks have a lot more resources thanwe do, it's really going to be an operational burden on both sides for us. Youknow, if we can be honest with the banks and we can share openly the burdens wehave, then I think we can work together to create some practical solutions forchanges. So, I don't think it's just a problem for the practitioners; it's onboth sides. 

‍Sune Warberg Clausen[00:21:07] Yes. If I could add tothat, I think banks always want to make it easy for the customer, but I alsothink, within KYC, they often fail doing that. And one of the reasons for thatis that the internal cost for banks in KYC is extremely high. So they are stillfocusing on internal processes to be more efficient. And for example, onlineplatforms is a big advantage of the banks because they can be fed directly intotheir own data tables. And for most, it's also a really good idea because it'seasier than using a PDF. But what we see for very large and complex companiesis a bit annoying with all these different platforms because it's even moredifficult to reuse data and you have to you get passwords and you must log inand remember them and you know, all that. So that's also a part of what we'retrying to solve because that's not the good solution for big companies. 

‍Sune Warberg Clausen[00:22:09] Another thing that goesin the other direction is making it easier for the customer. I think banks alsostart thinking, we can't take the entire risk, some of the respect from thecompany, which means that what they require from their customers increases. Youknow, how are they handling their customers and counterparts and all that. 

‍Ernie Humphrey[00:22:31] Yeah, soon, do youthink the banks so we're seeing some of our are banks partnering with fintechpartners like Avallone to maybe white label and leverage what you guys arealready doing. Which we would all love to see. Are you seeing some appetite forthat or you think it's a ways off for them to really realize that that's whatthey need to do? 

‍Sune Warberg Clausen[00:22:54] No, we feel that someof, especially the big banks who know that this is a problem that they mustsolve. I don't think they necessarily know exactly how to solve it, but one ofthe ways is if talking to customers or companies like ours, right? And Idefinitely think, again, banks want to make it easier for their customers. Sothey're kind of struggling between being compliant, not having a problem withregulators, and then at the same time making it easier. Yeah. So there's a lotof interest for that. Yeah. 

‍Lee-Ann Perkins[00:23:27] Can I jump back inthere just to comment that, you know, while we're grateful that there's techcompanies out there and others that are working on these solutions for thepractitioners, it's a heavy investment in these systems. So what some of thechallenges we've seen is that, you know, a vendor has a system and a tool thatwill help automate KYC, help us get the data to the banks, but not every bankis going to accept that. And unless you know which of your banking partners will accept that information upfront, the ease of getting budget diminishes. Sowe have to just make sure that these solutions, while the only way to mature iswith automation, we just have to make sure these solutions we invest in willpay returns and dividends going forward, that our banks will accept them. It'sjust a caveat, yeah. 

‍Sune Warberg Clausen[00:24:22] I fully agree, and Ithink there's been a lot of attempts for different ways of kind of making thesetools where you can reply to bank in the easy way, and most of them havefailed. I think one of the reasons is exactly what you point out: if there's a requirementthat the bank should be a member of that or signed up for that for thatservice, then it will be impossible. It's extremely difficult to get all banksaccepting the same. To me, what we're doing in Avallone is that we kind of, weboth allow our customers to send data in the format that we are providing. butalso to use the templates and the questionnaires that the banks has to fill inthe information in that. So you can decide if you want to provide in the formatthat the bank asked for, or you want to do it in your own format. I thinkthat's needed because we can't make agreement with all banks - short-term,yeah. 

‍Lee-Ann Perkins[00:25:18] You can't even get all banks to accept digital certificates and signatures yet. 

‍SPEAKER_3[00:25:22] So what a way to go? 

‍Lee-Ann Perkins[00:25:24] But grateful you're yousee the issue and you're helping both sides of the of the problem here. That's great. 

‍Ernie Humphrey[00:25:31] Sune, do you see us are you getting to the point where you are going to just market and announce, like,we work with these banks? Right. You get to that point where they're almost certified. Right. We work with these banks, and this is where we're finding traction as a practitioner. That's what I see. I'd love to see, like - I'm not going to say bank name, but bank X, oh, bank X, you know, works with a toollike Avallone. So this is the - the translation uh is kind of already there. Soit can be like a more of a seamless process. I would say yeah. 

‍Sune Warberg Clausen[00:26:06] Sometimes this can feela bit like the hen and the egg, right? Because it's difficult to make anagreement with banks if you don't have a lot of customers that want to deliverfor that channel. And it's difficult to get the company to sign up if there'snot a lot of banks. signed up to it right so. so what we have focusing on is tohave a solution where it's easy for banks to accept it because it's in theirown format, which means that we have plus 100 other banks that accept packagesfor us, but where we don't have an official agreement with them, right? It'sjust our customers sending them information and they have agreed to it. Thatdoesn't mean that we don't spend time on talking to banks and maybe we want tohave more formal agreements because I think that would be a great help on bothsides. if there was a closer cooperation, for example, feeding data instead ofdocuments, right? So yeah, so that's something. 

‍Ernie Humphrey[00:27:06] Leon, let me ask you.So you obviously have a lot of conversations with your peers. Are you hearingthe same challenges? And then I guess my better question is, are othersstarting to see that banks are asking even more information or different typesof information? It's evolving like almost in live right in live time as theyrespond to market conditions as well. 

‍Lee-Ann Perkins[00:27:33] Yeah, you know, this isprobably the number one thing we discuss as treasury practitioners in ournetworks is it's a frustrating issue for all practitioners. We spoke recentlyabout the use of AI in KYC, and you know, the question was asked to theaudience, like, if you could just have one thing that would make KYC better,what do you think it would be? And we tend to believe that the use of AI inthis area will help. Because as you just mentioned, the banks are not it's nota static process where they ask a certain number of things and off you go andit's approved and carry on. It's getting more and more involved in this globaleconomy with the geopolitical risks our companies are facing in those areas. Soit's getting deeper and deeper into the requests and it's taking up a lot ofthe treasury practitioners' time. It's almost like. You must have a dedicatedrole for KYC right now, and getting resources as everyone in treasury knows isextremely challenging. 

‍Lee-Ann Perkins[00:28:36] So we talk about it alot. We are looking for solutions. We've been in different groups along theyears, where, you know, Swift tried to have a portal, and there were just manydifferent companies that came up with solutions for KYC. And we haven't reachedthe point yet where we found something that is a shared utility forpractitioners. But I do think that, you know, AI here is the use of it is goingto be what's going to help us going forward. 

‍Ernie Humphrey[00:29:06] Yeah, I think that's tome where, when I started talking to Avallone and I kind of sought them outbecause I kept hearing about KYC and then and I talked to Anders and what I gotfrom as well as other Treasury solutions that we have - you can tellimmediately if this if someone who came up with a solution had the face pain.So I think that's a big thing in Avallone because they have, and Anders, thathave been there, doing this on both sides, right? Especially the bank side, sothey really understand the challenges, and they really know the weeds, likenobody else. So that's what we get. Lastly, and of course, is the weeds, andhow do we help everyone get out of the week? So we can make. That connectionsoon, any additional thoughts on that sprung. 

‍Sune Warberg Clausen[00:29:51] With the latest thingsin AI, with the LM models, I think Chat TPT etc. it's a huge opportunity onthis area. Right? There's also a lot of uh pitfalls. So it's uh we're buildingin AI even more than before into our platform, because it we can now do thingswe can do when we started off five years ago. Right? So there's some goodopportunities, but also, we can also see there's some issues with it. 

‍Sune Warberg Clausen[00:30:25] We had a customerasking, why shouldn't we just use Copilot and SharePoint instead of Avallone,right? But it's like SharePoint. Large companies have millions of documents.So, if you want Copilot to start just digging into that for answering to KYC,it will not be efficient, right? So you still need to be smart about it, but I thinkthat should and will be a big time saver in the future. 

‍Lee-Ann Perkins[00:30:52] One of the majorchallenges with KYC is the security of the information. I mean, you know, wehave executive information, their passports, their social security numbers,their driver's license. So, you know, you'll comment about just usingSharePoint or Copilot. You can only do that if you have absolute stringentcontrols around that information that the data is not going to get out anyway,because this is personal information that is impactful. If it gets outside ofthe company, so it's that security level, I think which makes systems more challengingfor those developing them and for companies wanting to use and buy them.Because we just must be sure that the data is safe. 

‍Sune Warberg Clausen[00:31:33] I fully agree. I thinkalso we see that senior people, who are delivering their passports to everyonein the organization, start asking, 'What are you using or 'Who do you share itwith?' With a tool like Evelyn, you can actually give an answer. Where if it'sjust a you actually don't have for tonight. 

‍Ernie Humphrey[00:31:53] Right? And I'm probablydating myself here but let me sorry to jump in here. Dating myself here. But Iused to have to ask for executive information for banks, insurance, or whateverthat is. And we all will know they're not happy about that. It's not likethey're going to give you a lollipop. 'Hey, I want to give you my passport.' Idon't think we talk about that enough in Treasury. The pain of doing that, andthen the value of having that all in one place where we can share that. Leon,like I said, like it's going to be accepted without having to go back to ourexecutives. That's the last thing that they want to talk to you about. 

‍Lee-Ann Perkins[00:32:32] Yes, because you wantyour executives to know you and you want them to know the strategic valueTreasury brings. But oftentimes they know you as that person who's alwaysasking for something for the banks. So you want to try to avoid that, and youwant to keep that information secure. But it's kind of a fine line. 

‍Ernie Humphrey[00:32:51] I think we've talkedthrough this, but let's dive a little bit deeper. So I think we've done a goodjob of saying okay, we have this traditional view of KYC, and the expandingperspective is KYC counterparty. So counterparty can be, if your banks areasking for it, but more importantly, internally as a company, so we understandwhat our counterparty risks are from our suppliers and our customers. Andreally, on the compliance side, you don't know what you don't know. Of course,soon I'll let you comment here in a moment. But I don't think people have anyidea of the risk of having that go sideways on you. So, from that KYCperspective, so I know there's different, there's different modules, uh, in theAvallone solution. One is the responder, which is the automating piece, butthen there's the other two pieces, and other pieces, which I think are the bigchallenges. One is how. Do I assess the financial health of my organization? 

‍Ernie Humphrey[00:33:53] And secondly, how doesthat get updated? And how do I proactively know when things are changing? Sune,you want to comment on those areas or give us your insights there? 

‍Sune Warberg Clausen[00:34:04] Yeah, so I think thewhole counterparty assessment thing called KYC, you know, your counterpartyagenda, right, is really, really growing, especially after Russia's invasion.In the Ukraine, that with all the sanctions that followed with that, there's alot of focusing on that. 

‍Sune Warberg Clausen[00:34:26] So what we see is thatmore and more non-regulated companies are starting to ask their counterparty,like customers or suppliers, for traditional KYC information, but also doingscreenings you know screening for sanctions and diverse media - really want toknow what kind of risk they are exposed to if they have a certain counterparty.and you could also see that in the in your questionnaire or in the poll thatlike that it's not only banks asking it's also your company and that's simplywhat it is right that that more and more stuff and I think for that is alsothat banks want to see companies that they are managing the risk not just beingable to apply on some questions but also they will see especially if you arehigh risk you will see more and more questions about how are you running yourprocesses and how are you doing that? 

‍Sune Warberg Clausen[00:35:21] And banks will expectto know that. They expect to say, who are your counterparty? How do you reachthem? 

‍Ernie Humphrey[00:35:29] How are you dealingwith this situation here? So let's say you have the financial health and theyget credit approval or whatever. What if something changes? What resources doyou have or how do you even imagine to stay on top of that? If something majorchanges in their financial health, might go sideways. How do you deal withthat? Or how would you like to be able to deal with that? 

‍Lee-Ann Perkins[00:35:59] Yeah, I mean, how Iwould like to be able to deal with it is to have, like, an automated yeah. Andyou know, so that so we know something is updated and we know how to deal withit. And I think the same for the banks. You know, when they're working on reviewingour company's risk, we should be providing information to them proactively whensomething happens. And it's a whole lot easier when you work in a publiccompany because information is out there, particularly financial, and it's not as challenging. But when you're dealing with private companies, and there's alot of levels of ownership, it definitely makes it difficult when thingschange. So in Treasury, we have to do our part by being proactive and ensuringthat we have the right information that we can send to our partners andbankers. But I also think, what we're seeing is, with the complexity and thevolume of these types of requests, it's looking like the need for compliancedepartments is growing ever greater. Because treasury, while we need to addvalue and be strategic, we don't necessarily have the resources for all thisreview and additional paperwork and challenges that come with this thiscounterparty risk or additional KYC. 

‍Lee-Ann Perkins[00:37:14] So we have to make surewe're staffing correctly so that we can adhere to the requirements that arecoming our way because it is incredibly important. As the world changes, we'veseen you know counterparty risk becoming more important with supply chains,banking networks, and vendors changing, they've become riskier and morecomplex. So this is, in my opinion, counterparty risk is not a bank-imposedexercise. It's something that internally we should have in our enterprise riskmanagement protocols. 

‍Ernie Humphrey[00:37:49] May I assume now, letme ask you the question here. So this is another webinar. We'll talk about howto implement the KYC. Program and what that looks like - so we have a couplequestions about who should own KYC. I think, from my perspective, especiallyfrom listening to Lee-Ann, it's got to be. And I know we don't like to have alot of committees; it's almost got to be some sort of team. Right. I want tohave Treasury, I'd want to have someone on the customer side, someone on thesupplier side, and then legal side. So, soon, how do you see companiesembracing this challenge and that new uh counterparty risk perspective? 

‍Sune Warberg Clausen[00:38:25] That's a really goodquestion. And I think the problem is that often KYC is the task nobody wants todo, right? So, therefore, it ends with the one who has the biggest problem. Andthat's often a treasury because they need bank connections, right? 

‍Sune Warberg Clausen[00:38:41] Yeah. But I think, ifyou talk about, first of all, if you talk about responding on KYC. I think itneeds to be a cooperation between different so I think it seems natural to haveit in the Treasury. But there's also information you need for seniormanagement, there's information you need from the legal department, and allthat. That's why you also need to have tools where you can do cooperation andmake sure that different people keep the data updated. One thing is to apply,another thing is to get the data that you need to do the reply for. Right whenwe talk about the counterparty, due diligence, collecting, screening, handling,and all that. I would say you should build some professional teams that can dothat. I think it's a very different task compared to what you normally do inTreasury. And if you want to do it in a proper way, you also need someone whois skilled for it and who likes to do it. Which I think maybe is the mostimportant point. 

‍Sune Warberg Clausen[00:39:42] That, if you want to dosomething good, you should also like to do it. Right. And that could both befine - creating a team internally, but it could also be to kind of delegate itto some managed service externally, like we do in Avallone. But also there's Alot of other windows for that, right there. I think the professional skills isimportant here. 

‍Lee-Ann Perkins[00:40:03] Yeah and but I totallyagree with you and particularly on the legal side, you know, we shouldn't besending documents out the company that legal hasn't reviewed, but we also needtheir input. So I think having a racy chart and stacking it correctly is howyou get all these different people together and ensure you're getting theinformation. Otherwise, if everyone owns it, no one does, and then it justfalls on treasury and it's just another task to do. 

‍Ernie Humphrey[00:40:32] Yeah, I just want todovetail on a comment that Lee-Ann made about getting information. Aboutprivate companies, so I'm dating myself again when I was in Treasury. They hadthis uh branch called Competitive Intelligence where we try and findinformation on private companies. You couldn't find anything - I mean, therewas like nothing out there. So soon, can you give us some insights on uh, whereyou guys compile information, or do you have information fed into your system?So you know, what - how do people tackle that, or how have we evolved ingetting that information? Yeah, yes. 

‍Sune Warberg Clausen[00:41:10] So basically, you cansay, in the KYC tool like ours, is transparency and sharing information, right?Collecting and sharing information that doesn't matter if that's external - youcollect from or share with - or it's internally. So our tools are also made forhaving secure ways to collect information internally in the company. So, forexample, sending out a small request for a passport or you know these questionsin this questionnaire, you can send to the legal person that can go into thesystem and handle that. So I think it's all about having some good cooperationtools in in in your software. Also, to make sure that everybody has access toit and can work together. I think it's a it is a collaboration task at KYC. Ithink it's really rare that you have one person that can sit and knoweverything that is asked for. 

‍Ernie Humphrey[00:42:08] Yeah, I think uhanother aspect is along the competitive intelligence side. When I was intreasury, we had field service engineers and people that were close to themarkets and the customers, and they had all this amazing information that wouldhave impacted our decisions until we could understand our risk. But that sat intheir department, in their folders. So I think a huge benefit of having a KYCplatform is everyone has access to the information. And when John says, 'XYZcompany,' they're going to, sales is going to go down by 50%. Well, we need toknow that, right? So I can't imagine, Lee-Ann, how many systems you wish youcould tap into because you know it's there - maybe, but you don't have any wayto consolidate or pull that together. 

‍Lee-Ann Perkins[00:42:52] Yeah, and that's whyI'm such a huge proponent of enterprise risk management because it's exactly asyou've described. If you have a system where the information resides andeveryone has a different type of access, then you get the information you need andyou have a holistic view into the risk of your customers and anyone else you'redealing with. it's the data sits siloed in so many places and that's I meanthat's for everything we do in treasury when you we were talking earlier aboutforecasting before this webinar it's the same thing where people haveinformation that you need but it's bringing it together to the right people whoneed it that's the challenge that's the challenge of working yeah soon I wantto I want to I want to come back to you a little bit um on the whole umfinancial crime prevention side of it can you dig us a little bit deeper onthat side of it and the risks that are out there and how KYC is helping ishelping in that area so I know there's legislation that passed or may not havepassed so are there any regulations 

‍Sune Warberg Clausen[00:43:56] and laws that you mightwant to share that that really should help motivate people to pay moreattention at all, yeah but I think, um, first of all, regulation is kind ofbeing brought out more and more, right? So it's more, more company that isregulated, so more, more needs to kind of collect this information, but I and,and KYC for me is the core of the discipline. So this is, this is where youreally get the insight you need to do all the other risk mitigation actions. Sothe monitoring of what's happening, the reporting to the authorities, theauthorities that can kind of use this information to fight financial crime,right? Um, I just uh posted uh I think it was today or yesterday uh an articlefrom FinCEN about, you know, how young people are misused for financial crime,right, online, and how AI kind of supports perpetrators on that. I think thisis just something we always need to remember when we think how annoying KYC isand how it is we have to do it. 

‍Sune Warberg Clausen[00:45:03] But the crime we aretrying to prevent behind this is really, really... Bad right, it's real crime.It's trafficking. It's modern slavery. It's drugs. It's all bad things. Right.So I think, um, I think it's yeah, it's important that way. 

‍Ernie Humphrey[00:45:22] I think another valuein the information side of it, which also I dealt with in my past, was we hadsales people going into countries and doing business, and they weren't reallytoo concerned about what they should and shouldn't be doing. So be having aplace where they can come, or we can send out alerts like, 'Do not sell,' 'Donot do that you know, staying on top of all these different uh regulations andcompliance issues to those folks, and giving them a place to now they can say,'We're not informed but now we can say, 'You are informed.' This alert went toyou. So I just curious, soon have you if you had conversations about that withcompanies, and then Yeah. 

‍Sune Warberg Clausen[00:46:07] and I think maybe alsowe are past the place where you could say, 'I didn't know,' because people sayyou should have known, right? So I think a lot of this, with the counterpartydue diligence, or know your counterparty, and the screening, and the adversemedia, and all that, is saying, 'if you should have known, you should havereacted to it,' right? So you can't just claim you didn't know because youdidn't do anything. I think maybe that's kind of the big shift you see at themoment that doesn't fly, right? I think a good example we have from Denmark isa company who is making painting, a Danish company, and they sold a lot ofpaint to Russia. And then the sanctions were imposed, and suddenly they sold alot of painting to Kazakhstan instead, right? They said, but we didn't knowthat the painting from Kazakhstan went to Russia. 

‍Sune Warberg Clausen[00:47:02] Somehow they shouldhave known, right? If suddenly the sales just go from one place to another,there's probably a likelihood that it ends up the same place, right? So I think we would see more and more on that, that the expectations from the companies and what they should have known is just increasing. Monitoring and screening and all that isan important, important, important, yeah, sorry, to solve that, right? 

‍Ernie Humphrey[00:47:31] Lee-Ann, what thoughts do you have to add here? And how do you, I don't know if the rightword is 'insert yourself' or 'have connections with your insurance people,'because our insurance was based on where people went and how many days wentthere and all that, besides doing things they're not supposed to. So how do youlisten in and try and inform folks within your organization? 

‍Lee-Ann Perkins[00:47:53] Yeah, it's a goodquestion. And I like what you've mentioned, Soon, because it really is aboutknowing what the customer is doing. You know, compliance might be the origin ofall of these things, but the destination is really about the risk and the intelligenceof understanding that risk. And this is also where public companies have anadvantage because they have well-resourced audit departments. They have, youknow, SEC responsibilities in the US and other regulators abroad. 

‍Lee-Ann Perkins[00:48:26] If you have internalaudit departments, you typically can have these structured approaches to whatyou can and can't do, and you have reviews of information because it's no goodjust having a policy if you're not testing it. That's why private companieshave to work harder. We have to make sure that we have these processes inplace, we have the testing in place, and we have education so that everybodyknows and likes. You said earlier, there's no excuse for not knowing anymore.And Treasury is definitely in a unique position because we are like I saidearlier, we interface with so many people in the company, and I believe we canconnect the dots nicely against finance, procurement, compliance, operations,and sales. If we can get that buy-in from the C-suite and from those who aremaking these decisions, we can help to inform, we can help train what we'relearning, such as webinars like this, or from our banks, and disseminate thatinformation so we know the company is doing the best job it can with theinformation 
‍
Lee-Ann Perkins[00:49:35] it has. It's reallyabout Each one should teach one okay soon. 

‍Ernie Humphrey[00:49:40] Let me let me get yourinsights here. So, kind of a two-part question. First part: are you seeing anyindustries or company headquarters locations that seem to have more of anappetite for this KY - the counterparty approach - and the second part: wherewould you like to see more focus? Is there certain uh industries or things thatare like these people really - you know - are about, really should be even morefocused; it should be more of a priority to them. 

‍Sune Warberg Clausen[00:50:12] Yeah, so first of all,I think it probably follows a bit the industry. If you are an industry in highrisk products or high risk areas that You are operating. You would see, seemore of the kind. Um, I think what I would like to see is it's not just aboutbeing compliant. Right, it's also about company taking the responsibility andsay, 'We're not doing this because we have to. What we're actually doingbecause we want to do the right thing.' I think you often see new stories aboutcompanies that are doing something that is criticized but it's legal. Right,and then you could say, 'Yeah, but the politicians should just kind of, youknow, make more regulations.' But on the other hand, we don't want that, right?So I think it's also about saying, 'Hey, we should just do the right thing.'And that, of course, differs from company to company where they want to puttheir risk. But I think a good compliance program should be kind of based onthat you actually want to do it differently. 

‍Lee-Ann Perkins[00:51:22] Can I just respondthere? I think that's an excellent way. You know, and from a practitioner'spoint of view, I think that, whether it be KYC or counterparty risk review, itshould be that proactive safeguard that's going to support the growth of thecompany rather than slow it down. And that's what you said. Soon, is it? It'sabout doing the right thing because you're doing the right thing, not becausethere's legislation in place or you you're required to for some other reason.It's about safeguarding your company to support its growth. 

‍Ernie Humphrey[00:51:56] Right? That kind ofdovetails on. You answered the question I was just going to assume, which wasaround - when should companies start? Right? To address this challenge, andwhat is the right time? Is there a size, or, as Lee-Ann just said, I'm nottrying to answer my own question. I'm a good job doing that. Is you want towant to do this before you grow into all these countries before you do thesethings? So, when you're going to a company, and they're trying to look atwhat's the value proposition. Or what's the value? What are a few things thatyou share? 

‍Sune Warberg Clausen[00:52:32] Yeah, it's a goodquestion, but I think all companies are different, right? So they can bedifferent. But if you're a scale-up company, maybe you want to do it so you canget funding and you can show you're in control of your processes, right? Ifyou're a really large company, like we work with NGOs, their big problem is ifthey're not in control of this they don't get the funding to the crisis areathey want to send their funding to which is one of the biggest issues for uhfor them to run the programs that they need funding out there right um if youare a oil company you know you need to be in control that you don't sell yourjet fuel to the Russian army and stuff like that so I think there's a there's adifferent a lot of different reasons for it uh But I think most company that isnot operating in like boring countries like Denmark and they maybe even alsoknow you need it, right? But you know, as soon as you go into industries orareas that is normally considered high-risk, you definitely need to. 

‍Ernie Humphrey[00:53:36] Yeah, I would just sayI think we touched on, so I asked this question, but I we talked about theanswer. So it's like, if someone invests and in a solution like Avallone, whatare the benefits that they got versus what are the other benefits they didn'tthink about? So the automation piece - the time savings that's evident - but wetalked about a lot of these things. The information sharing, the riskmitigation, it's a Christmas gift because of this. We did not do business here;we did not do business there. See, I'm an Avallone advocate already, butanything else that you want to add? Soon of things you've heard when they'vedone this or like, wow - I didn't even unexpected benefits. I think that'simportant for people to get. 

‍Sune Warberg Clausen[00:54:20] A little bit no, Ithink most of our customers are happy with you know, getting rid of thefrustrations. To be honest, right, so they save a lot of time, but the wholefrustration part of it is extremely important. I think it also sometimes keepsthe discussion around who should, who should do what, who is delivering what,who keeps the system updated. So sometimes a software can also kind of startthe right discussion in the company, but I think what I would say, mostly forour customer, is that they save time, they get much more structure on it, theycome about the GDPR or data protection rules and stuff like that. Right, so Ithink it's all about to get back in control in this area. 

‍Ernie Humphrey[00:55:05] Yeah, okay, let's startto uh put a Bow on things. We've had an amazing conversation. So Lee-Ann, I'mgoing to ask you first. So you've done a great job of giving us a lot ofinformation about why treasuries should care about KYC and why the riskcounterparty is important. Can you give us, like, two or three, like, justsummarize comments of why? So someone on here is like, 'Why? You've done agreat job just to put a fine point on it, to leave that in people's minds withthe webinar. 

‍Lee-Ann Perkins[00:55:36] Yeah, I think, youknow, we know that KYC and counterparty risk is not going away. So we mustchange our mind shift, and we must ensure that we're not reactive, but we ownthe process. We can make the compliance easier, and we can make the businesssafer. And we were talking about moving into different countries as companiesgrow. Make sure you have treasury involved in those conversations, because ifyou can't open a bank account or you're unable to fund that account, there's nopoint going into that country if there're all these um these compliance issuesthat you're not able to overcome with banking. So keep treasury informed andtreasury should understand, also, why it's important for us to be informed.That's one of the reasons is to make sure we can future-proof the company aswell and that this is for the most part, a risk management exercise. We must doit. It's helping our companies. It's protecting our companies. 

‍Lee-Ann Perkins[00:56:37] And it's helping us as treasurers to provide more value to our companies. And I just think it's, youknow, it's really moving from all that compliance fatigue to the risk intelligence part of it that Treasury is so good at and so valuable to the company. 

Ernie Humphrey[00:56:55] OK, soon I'm going toask you. Going to note here: I'm going to launch our final polling question here. While soon I want him to give us two or three things that you'd like to leave with the people that have attended the webinar, but also the hundreds of people that are going to listen to our great conversation afterwards.

‍Sune Warberg Clausen[00:57:14] But I just want to saythat I um I fully understand the frustration. Not a lot of people love KYC. Wedo it at Avallone, right? But not many other places. But there is software out there. Avallone is one of them that can help out. And I would say some of the frustration I heard from Lee-Ann, we could set some check marks for that. 

‍Sune Warberg Clausen[00:57:38] So I think tooling is apart of the solution. Because KYC sometimes doesn't sound that complex, butit's actually extremely complex. You know, if you work with it right, so it's acomplex thing. You often need system to solve it. 

‍Ernie Humphrey[00:57:57] Okay, thanks so much.So one more time, Lee-Ann, thank you so much for your time and your insights.Extremely appreciate your practitioner perspective as always. Incredibly valuable. So thank you, Lee-Ann. 

‍Ernie Humphrey[00:58:12] I want to thank Soonfor your time and your insights. I want to thank Avallone for partnering with me. So this is our first webinar. We are going to start promoting our next webinar, which is going to be on October 8^th, 2025. So stay tuned for that. And everyone on the webinar today, have the courage to live your treasury truths every day and care to be great in everything that you do. Until next time, everyone, make the rest of your day great.