I have had multiple meetings with prospective customers who run some trading processes, and I have yet to fully understand their approach to KYC.

Mind you, these are not banks or funds, but companies that, in some way or another, consider trading an important part of their business. They are not necessarily regulated, but they would like to know who they are dealing with, avoid sanctions breaches and avoid reputation risk.

Sometimes, they also want to know the financial strength of the trading counterparty in case they need to take any financial risks on the counterparty.

Due to the trading element, these companies have one thing in common:

‍They all want KYC done within 15 minutes because there is a trade waiting to be executed.

This also means that they are not able to perform outreach to the counterparty, as it's unrealistic to expect anyone to reply to questions and deliver documents within this timeframe.

Therefore, these companies often rely solely on public data - with all the limitations this implies (as described in an earlier post "KYC and Public Data: 5 Costly Misconceptions Funds Should Avoid") - to maintain a compressed timeframe.

There might be good reasons for this approach, including the fact that trading counterparties are often one-time or non-recurring, or that there are special reasons for the compressed timeframe.

However, you would never be allowed to do this in a regulated entity.

Imagine if a trading floor at a bank operated this way:

A customer who has never used the bank before calls a trader and wants to trade, and the bank says, "Sure thing, give us 15 minutes to create you in the system." That would be unlikely.

The problem might be that if all your competitors operate this way, you will gradually lose business.

The solution to this problem is a risk-based approach.

Some customers always require full KYC. You can't complete it in 15 minutes, but with the right tools and a responsive customer, it can be completed relatively quickly.
For others, where certain low-risk factors are met and where you feel confident it’s a one-off transaction, you could rely solely on public data.

But then again... A highly regulated company would never be allowed to.

Have I misunderstood anything?

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KYC and Public Data: 5 Costly Misconceptions Funds Should Avoid