Know Your Customer Compliance Guide for Banks

Kyc for banks

The phrase “Know Your Customer” is not new to most in the industry. Where the requirements of KYC are a mandatory implementation for sound operations in today’s stringent regulatory environment. Considering the failure to implement such measures exposes you to non compliance fines, financial and legal repercussions along with reputational losses. Especially in the case if you happen to do business with a politically exposed person or show any sort of alliance with unknowingly.

While many traditional and veteran banks spend over $100 billion on regulatory compliance. The new and uninformed ones need to start somewhere, a kyc compliance guide is necessary for them to have a starting point for their KYC compliance program. So let’s have a look at a few brief points on what banks need to know before they begin their compliance journey.     

KYC for Banks A closer Look and Issues

All major regulations call for financial institutions to establish a credible KYC-Know Your Customer and AML anti-money laundering program. This program allows a bank to establish measures that help them identify their customers more closely and perceive them from a risk angle. Currently, these KYC procedures are not consistent and lack uniformity across multiple set use cases. The present regulations do not set any specific kyc compliance guide for institutions to follow. Leaving much for financial institutions to implement at their own, hoping the FI’s would push the boundaries of compliance.  However this inconsistency has led to differences and much complexity to brew within the compliance ecosystem.

KYC Compliance Guide – A simple Take

For any financial institution, a simple sure way would be to establish a KYC program that addresses some basics about a customer. The identity of the customer, the nature of the customer that includes their business type and the origination of their fund source. Also the money laundering risk that the customer poses to the businesses. These key aspects ensure a business has a decent idea of who they are dealing with and whether the monetary transaction carried in between are legitimate and not of any proceeds of crime. These steps ensure the protection of the business even if a potentially doubtful individual is encountered, by taking appropriate measures with ample time.

Know Your Customer Program

The most prime asset of a business are its customers and unlike before, where they are on-boarded without any prior consultation or authentication. A KYC program helps establish the identity of the individual and verify the details in the process. In a time where identity theft is so prevalent and fraud is high, the identity of the person needs to be verified before conducting financial transactions. This is mandated by regulations like the Patriot Act.   

Due Diligence

To ensure trust on a customer and their worth, diligence plays an important part in helping companies to manage risk posed by their customers. Accordingly, diligence measures can be divided into Customer Due Diligence, Simplified Due Diligence, Enhanced due diligence and matched to the customer profile.  

Real-time Monitoring

No transaction or account should be left as it is, each aspect of the customer relationship, business profile and monetary transaction should be monitored in real time to assess the potential risk that might be unearthed from fraudulent transaction patterns and system manipulation techniques.

KYC Compliance Guide Bottom Line

Compliance is a daunting task for the people in it, but it doesn’t mean we can operate without it. Whether today or tomorrow, it has to be implemented. A simple KYC compliance guide is a good start to gain your understanding on the overview of what is to come for in a compliance program. The more banks and other relevant businesses understand the particulars involved in compliance from the onset, the more they would be willing to implement compliance earlier on and not be surprised of elements that might inflict harm ater on, In respect to financial fines and reputational damages.  

Author: Amelia Matthers

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