What are know your customer (KYC) Checks?
For a best in school KYC programme, it should be considered as an ongoing process to assist you suits requirements and continuously feed back to risk management and business strategy.
It is a process designed to make sure you recognize who know your customer is, what activity you ought to expect from them, and therefore the overall risk they present to your business. this permits you to watch that risk and mitigate it.
KYC is one among many three letter acronyms across regulations and guidelines that touch on the method you set customers through to interact together with your business. As you’ll already know, it stands for ‘know your customer’. there’s also CIP, IDV, or is it CDD? Perhaps EDD? to form things more complicated, these can sometimes change across geographies, with some regulators preferring one set of terminology over another.
KYC are often thought of because the umbrella term,
under which the opposite items sit. A Customer Identification Programme (CIP) is how US regulation refers to gathering basic customer information (name, address, date of birth for a private and an ID number) to make a ‘reasonable’ belief that truth identity of the customer is understood . biometric identification (IDV) tools are often wont to verify that identity. it’s increasingly common to use electronic and non-documentary means to try to to this. CIP would also include a check against relevant sanctions lists.
This is the primary phase of Customer Due Diligence (CDD), whereby more information is obtained regarding the individual or entity. Things to think about could include where the individual or entity is predicated , whether or not they are a politically exposed person (PEP), the road of business they’re in or more details about their management or corporate structure. If any of this information means the customer should be considered ‘high risk’, enhanced due diligence (EDD) could also be applied.
This information helps your business determine the expected activity from that client, for instance , the quantity , value, and frequency of payments across an account. you’ll set transaction monitoring scenarios accordingly. Throughout the connection , when those thresholds are breached, you’ll seek information about where this unusual behavior is coming from, report it if suspicious, and realign expectations if this is often to be a replacement normal for that customer. you’ll choose an ongoing basis whether this is often a relationship you would like to continue with.