Know Your Customer Best Practices

Financial institutions have a lengthy list of Anti-Money Laundering compliance requirements. They face a mountain of risks from a large number of financial transactions, each of which can carry significant risks.

AML compliance programs are built on a systematic review of a large number of financial transactions. The focus of this review has to be on triggers that identify suspicious transactions or customers.

Know Your Customer procedures are a critical function to assess and monitor customer risk.

“KYC” refers to the steps taken by a financial institution (or business) to:

A best-practices KYC program will include the following elements:

A CIP is the starting point for any KYC process. In the financial institution context, a best practice is for the relationship manager to initiate the CIP process but coordinate and communicate with the due diligence manager.

In implementing this component, clear, defined process are essential. A consistent method of onboarding third parties indicates that an organization takes KYC seriously. All processes should be thoroughly documented to create a strong audit trail of decisions made. A company should keep an internal database with approved and disapproved third parties, vendors and suppliers to avoid duplication of effort.

At a minimum, due diligence should confirm beneficial owners, sanctions list screening of beneficial owners and relevant entities, politically exposed persons (“PEP”) involvement, and other government database checks.

In determining what level of due diligence is appropriate (CDD v. EDD), a company should look for “red flags” relating to:

EDD steps may include senior management approval, additional due diligence investigations, on-site visits, contractual certifications, third-party audits, source of funds certifications,

Conducting EDD on all customers is burdensome and undermines the purpose of a risk-based AML Program. By nature, some customers will inevitably present lower risks than others.

Best practices for financial institutions include transaction monitoring systems and refreshing due diligence information every six to twelve months.

Related posts:

Scara berdecak kesal, lantas membanting handphonenya ke kasur. Hari ini — tidak, seperti biasanya — dia tidak kunjung diberkati Dewi Fortuna. Sudah hari ke-545, sejak dia pertama kalinya resmi…

If you are here right now you may be wondering if the Direct Sales Industry is worth it or maybe you are wondering if it is even possible to make money in the Industry? Direct Sales simply means…

The Cryptosteel Capsule is a universal backup tool that features many elements with a wide range of uses. We will be showcasing just some of the different ways these elements can be used here…