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KNOW YOUR CLIENT / DUE DILIGENCE
Know your customer (KYC) is the due diligence and bank regulation that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. In the USA, KYC is typically a policy implemented to conform to a customer identification program mandated under the Bank Secrecy Act and USA PATRIOT Act. Know your customer policies have becoming increasingly important globally to prevent identity theft fraud, money laundering and terrorist financing. In a simple form these rules may equate to answering twelve questions, but this is the tip of the iceberg and regulators now expect much more. KYC should not be thought of as a form to be filled - it is a process to be undergone from the start of a customer relationship to the end.
One aspect of KYC checking is to verify that the customer is not on any list of known fraudsters, terrorists or money launderers, such as the Office of Foreign Assets Control's Specially Designated Nationals list. This list contains thousands of entries and is updated at least monthly. As well as sanctions lists there are lists of third party vendors that track links between persons regarded as high-risk owing to negative reports in the media about them or in public records.
Beyond name matching, a key aspect of KYC controls is to monitor transactions of a customer against their recorded profile, history on the customers account(s) and with peers.
Banks doing KYC monitoring for anti-money laundering (AML) and Counter-Terrorism Financing (CTF) purposes increasingly use specialised transaction monitoring software, particularly names analysis software and trend monitoring software. The generated alerts identify unusual activity which is then subject to due diligence or enhanced due diligence (EDD) processes that use internal and external sources of information on the subject, including the internet. This helps to determine whether a transaction or activity is suspicious and requires reporting to the authorities. In the US, it would require Suspicious Activity Reporting (SAR) filing to Financial Crimes Enforcement Network (FinCEN). In the UK, it would require a report to Serious Organised Crime Agency (SOCA).
KYC has different connotations and the definition above is from an AML/CTF perspective.
Know Your Customer processes are also employed by regular companies of all sizes, for the purpose of ensuring their proposed agents', consultants' or distributors' anti-bribery compliance. Banks, insurers and export credit agencies are increasingly demanding that customers provide detailed anti-corruption due diligence information, to verify their probity and integrity.
Some specialist consultancies help multinational companies and SMEs conduct Know Your Customer processes when entering new markets.
We have listed some web links, however no responsibility will be taken for their use, they have been listed for information only
Customer due diligence for banks
http://www.bis.org/publ/bcbs85.pdf
Anti money laundering
http://www.ipsaintl.com/our-services/anti-money-laundering2.php
World check
http://www.world-check.com/know-your-customer-kyc-compliance
Anti money laundering solutions
http://www.192business.com/compliance/money-laundering/anti-money-laundering-solutions?gclid=CO6D_pj7h50CFdRb4wodVDao0w
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