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Banks urged to restructure IT


Johannesburg, 28 Sep 2004

Banks need to "future-proof" their IT architectures and applications to get ahead of the regulatory curve, says business software solutions provider SAP.

Derik Seute, SAP industry solution manager, says there are few differences in the way local banks go about opening accounts.

"Bank clerks are drilled to understand that the only way banks can reduce risk is by ensuring that all information relating to customers is checked, proved and approved," he says.

"This means confirming names, personal details and addresses. Some bank managers even insist that staff physically visit premises before opening certain kinds of accounts.

"Why then, when the banking authority announced long-anticipated regulatory changes, did banks unanimously cry that the requirements of the Financial Intelligence Centre Act (FICA) were impossible to achieve in the allotted time frame?"

FICA regulations, which stipulate that banks verify the identity of clients to reduce money laundering, were debated in Parliament before the legislation was enacted, yet banks petitioned finance minister Trevor Manuel, who extended the deadline for compliance to 2006 from the original 30 June 2004.

"Why do banks need so long to verify their customers` details when they should have most of the information on hand already?" Seute asks.

He says banks have over time evolved their internal business support structures as standalone entities with their own customer and master data. Seldom would the entities share information about customers as this was often seen to be proprietary and a competitive or political advantage.

"This type of structure has resulted in silo thinking which cuts across not only business units and company structure, but also IT," Seute says. Each business unit`s IT budget is sunk into its own, separate, "best-of-breed" purchases with little or no regard for the rest of the group or other business units.

"Until now, that is. Suddenly extra-banking requirements in the form of regulatory and legislative compliance are driving banks to deal with internal structures that have worked well over so many years."

He says the only way to deal with FICA regulations in the short-term is to run an internal project that will micro-filter the data relevant to FICA, and cleanse and confirm the data. Only then will the bank be compliant - until the next piece of legislation.

"To get ahead of the regulatory curve, it would be more prudent for banks and those companies who have engaged in bancassurance to realign the architecture of their systems and make them 'future-proof``."

Seute says enabling IT architectures and applications to become flexible and scalable enough to deal with most of the inevitable regulatory changes of the future will allow banks to spend more time serving customers rather than inundating them with more requests to prove their identity, residence and citizenship.

"A common, enabled architecture allows a bank not only to share common customer information across the entire organisation, but also to align common processes and to leverage efficiencies for the benefit of not itself, but customers too."

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