5 Major Elements of KYC policy in Anti Money Laundering
KYC policy has five major elements:
5 Major Elements of KYC policy in Anti Money Laundering: The point at which a new customer is accepted or rejected is the easiest point at which the risk of dealing with illegal money can be avoided. By following good customer acceptance policies, dealing with entities and individuals who might engage in illegal transactions can be avoided.
Establishing the identity of customers is central to the KYC policy both for the customer acceptance or rejection decision and for the ongoing monitoring of customer accounts and transactions. By identifying customers effectively, the business is able to deal with them in the appropriate manner.
Verifying that customers are who they say they are is vital to any customer identification procedure. Merely collecting customer information is not enough for an effective KYC policy. Reliable and independent documentation should be used to support and confirm the identification details a customer provides. For example, citing an original primary photographic identification document such as a passport or drivers licence.
Accounts and Transactions Monitoring
In an effective KYC policy, customer accounts and transactions are properly classified in terms of risk and are regularly monitored. Through checks and thresholds, unusual activities, activities by high-risk customers, or suspicious behaviour can be detected and reviewed.
To ensure that the risks posed by money laundering and other criminal activities are identified, mitigated and managed good risk management practices are essential.
Another objective of the KYC policy is to look past the appearance of the customer and obtain visibility into the sources of the customer’s money. The basic objective is to obtain an understanding of the risk the customer poses to business. Could the customer use the business to facilitate money laundering?