VidMama

Know Your Customer: A Necessary Plan

The USA PATRIOT act, Section 326 , applies to customers accounts opened on or after October 1, 2003. It requires banks and other financial institutions to have a Customer Identification Program (CIP) , which will apply to a risk-based approach at verifying customer provided information. The banks and other financial institutions are facing an ever increasing regulatory pressure to improve the Know Your Customer  (KYC) programs, which not only confirms the CIP, but the sources and recipients of their funds.

Where many financial institutions are still struggling with the key requirements, like the CIP, many other financial institutions are improving documentation and KYC reviews for accounts opened before October 1, 2003, and match or exceed current practices and databases. This approach is comprehensive and ensures that organizations have a consistent institutional approach to the CIP, which will facilitate reviews in the future. It’s the absence of an effective CIP program that weakens critical components related to databases for certain accounts, which an institution’s anti-money laundering (AML) program, like the enhanced Due Diligence, becomes ineffective and creates a domino effect leading to non-compliance.

An effective Know Your Customer program must ensure that the institution has accurately confirmed CIPs, have properly considered a variety of risk factors and include processes to detect and deter potential suspicious activity. By implementing a KYC remediation project on a frequent basis will better enable a response to issues detected by the internal controls or when a regulatory agency orders an internal review.

KYC remediation projects include the involvement of senior management to establish an appropriate tone by clearly communicating individual responsibilities, priorities and accountability. Apply risk based approaches to monitor, identify and investigate all high-risk accounts. Use case-management technologies to plan a project, track and measure its progress and one that ensures individual accountability. Create tools to immediately identify customers utilizing high-risk products that will result in aggregation of dollar amounts. Finally, document all activities, this should include even the unproductive reviews concerning due diligence.  As you can see, an effective KYC program involves a lot more than collecting documents and data, it requires a proactive atmosphere.

Tags: anti-money laundering, Customer Identification Program, Know Your Customer, USA PATRIOT act

Help with the Anti-Money Laundering Compliance

After the attacks of September 11, 2001, financial and banking institutions have been inundated with increased regulatory oversight for the increase potential of money laundering activities . A good example of this is the identification of terrorist activities concerning any funding or finances has been added to the list of anti-money laundering (AML) issues . These previously only focused on stopping other forms of illegal activities, such as drug cartels or organized crime.

The US Congress, as an effort to first detect and then combat terrorist funding, has ratified the USA Patriot Act that provides a stringent AML regulations and will impose harsher penalties for financial institutions and banks if found they are non-compliant. These regulations will extend beyond the United States federal legislation to groups like the Financial Action Task Force (FATF), which was created by the Group of 7 Finance Ministers that are requiring banks who do business globally, to comply to the ever increasing onerous international AML regulations.

The potential loss of a bank’s reputation is only secondary to AML’s primary concerns of compliance with the regulatory requirements. But, any bank can reach beyond basic regulatory compliance if they think strategically, which will give them solutions to help benefit and not exploit business.

There will be issues with financial organizations and banks to achieve regulatory compliance, they are expected to improve AML capabilities into practice immediately and are to deter, detect and report any suspicious activity. The issue banks and financial organizations will run into will be establishing a AML policy and procedures across all aspects of their organization, appoint a corporate AML officer, implement a AML training program for all directors and employees, improve upon due-diligence for new and existing customers and proactively monitor and detect any suspicious activities.

The AML offers little specific directions regarding their fundamental mandate, so many companies have come to the aid and offering solutions to any company, financial institution and banks who deal globally around the world.

Tags: anti-money laundering, Finance Ministers, money laundering activities, regulatory requirements