KNOW YOUR CUSTOMER (KYC)
Do you Know Your Customer (KYC)? This is a very critical and consequential question that every financial institution should evaluate to diligently determine the associated risk posed by the customer and from the customer’s activities. The Know your Customer or Know your Client guidelines require financial firms to verify and identify the customer’s identity, their financial activities and the risk they pose based on the client’s background.
Customer’s identity like name, date of birth, address and identification number to be verified and regularly updated to authenticate the identity of the customer. Procedures and policies depend on the risk based approach of the institution and may include documentary and non-documentary practices or a combination of both.
Financial activities assessment to gain a deeper understanding of the customer’s source of wealth or source of funds and the method by which the customer’s account will be funded is also required. This will include but not limited to occupation, income, revenue, salary, bonuses, investments, inheritance etc.
The client’s background evaluation to understand the inherent risk posed by the customer must be conducted. Depending on the customer and firm’s risk-based strategy this can include but is not limited to politically exposed persons (PEP), adverse media mention, sanctions list inclusion, activities with high-risk jurisdiction, terrorism and related activities
KYC: 3 steps to effective Know Your Customer compliance, Trulioo, 2021.
Know Your Client Requirements, FINTRAC, 2021.