The plight of clients for onboarding by banks

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The onboarding of clients by banks in Mauritius has become a real chemin de croix. On average, it takes four to eight weeks, often much more, for a company having foreign shareholders to have an account created. Even companies with local shareholders have to endure the same pain. Even locals are facing the same experience. A Mauritian, who has been client with a bank for decades, had to wait for 12 weeks to have an account opened in the same bank for a company where he holds 80% of shares and is clearly the ultimate beneficial owner.

During the last six months, I have been on a survey of the matter through application for opening bank accounts for one existing domestic company having local shareholders and two domestic companies with foreign shareholders to open bank accounts. I surveyed four banks for the process, talked to 13 front line bank officers who interact directly with clients and six management companies. All have expressed the same frustration at the pain of the process.

Bank top guns may not be aware, but many locals express dejection and feel that “we are too small, these banks don’t want us as clients”. Many of the clients facing bank officers tell of how they have to face clients’ irritation and wrath while matters are not in their hands but in those of the compliance department, themselves being at the tail end of Central Bank reputation, who never interact with prospective clients.

Most banks will state on their websites that it will only take a maximum of 3 days to successfully open an account if all the forms are completed and that all information and supporting documents are included. This is rarely the case. It can actually take between four to eight weeks for an account to be opened. Usually, the banks will ask for more and more information and supporting documentation and they will do so in instalments.

“A Mauritian, who has been client with a bank for decades, had to wait for 12 weeks to have an account opened…”

It looks like banks consider they are doing you a favour opening an account for you or your business, not a business opportunity. In short, onboarding is damned inefficient from a client’s perspective. Why is it so? Five key reasons:

Banks or Bank managers’ strategy – quite a few bank middle managers have said that they’d rather deal with files of ten clients bringing in business of 50 million each than fifty doing ten million each. There is one foreign bank operating in Mauritius that will accept foreign clients only if such clients are already banking in one of their banks overseas. Of course, they do not say so publicly.

2. Focused only in one direction – the shadowy compliance staff is entirely driven by fear of the regulator oblivious of the need for customer satisfaction. The fear of making a mistake has driven financial institutions to over-tighten the rules and to insist with information and forms, which may not be necessary at all from a mandatory regulatory perspective. Banks often cite regulatory requirements as the main reason for complicated and cumbersome onboarding processes. Wrong! Too often, regulatory obligations are only a cover for inefficient processes.

3. Lack of training of client facing staff – this is quite evident in the case of most banks. The officers clearly only know they have to ask the client for a set of information and documents. Clearly, they have not been fully inducted in the regulator’s guidelines, and not been trained by the compliance team about the what and the why of what is required. Hence, they are unable to fully inform and explain the requirements to the client. While the latter sees them as his interface with the institution, the officer remains no more than a messenger between the client and the compliance team.

4. Lack of training of compliance staff – it is also evident that many do not understand the essence of what is required to ensure compliance and risk evaluation of clients even when the case requires an enhanced due diligence. Some insiders confess that compliance departments are often a dumping ground for staff considered inefficient elsewhere in the bank.

One interesting case example: a client submits as proof of address for one of the shareholders, a telephone bill from a well-known service provider in a European country where the shareholder resides. The shareholder also submits a bank statement from a well-known bank. Both documents bear the same residential address of the shareholder. The client facing the officer who received the documents comes back eight days after learning that the telephone bill is not valid.

Asked why it took eight days to come up with this matter, the typical answer is “compliance department Sir”. Why is the telephone bill not valid? It is a bill for a mobile phone (in actual fact the bill was for both mobile and internet service), we need a bill for a fixed line! Hell… this guy or the compliance staff who told him so clearly (a) does not understand that there are a growing number of persons who no longer have a fixed line telephone, (b) that the bill has a billing address, not the address of the mobile phone (sic!) and (c) that the bank statement and the service provider’s telephone bill cumulatively provide clear evidence of that shareholder’s address of residence.

Do you want a good joke which could be diplomatically offensive? Asked over the phone how long it would take to open a bank account for a company having two persons of French nationality and another with four persons residing in Reunion Island, the bank officer responded: “About eight weeks for the one having French shareholders and twelve weeks for the one having shareholders from Reunion.” No comment!

5. Inefficient process – some easy intelligence gathered from talking to a number of bank staff shows clearly how the existing process for onboarding (particularly in the local banks) is siloed. On top many banks use multiple core, legacy platforms that are unable to be properly configurated for new regulatory exigencies, talk to each other and deliver coherent client profiling data without having to repeatedly ask for the same information from the client. This leads to both more risk and regulatory compliance issues for the bank, but also to more frustration from clients.

Let it be clear that this paper is not a plea for reduced requirements for regulatory compliance and risk evaluation by banks. The essentials of regulatory requirements, albeit the multiplicity of them must be adhered to at all times. However, if client onboarding is not to become a hurdle in the Ease of Doing Business and a scare away of foreign clients from using Mauritius as a platform, it is high time for financial institutions to perform a strategic review of the process and implement a well-rounded much more efficient solution that satisfies the needs of their customers, the needs and competitiveness of the bank itself, and the regulators.

The Bank of Mauritius could do their part by providing training both to their own supervision staff and to those of banks to ensure aligned understanding of requirements.

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