Know Your Customer Requirements: What you Must Know

Conducting business internationally puts you at risk of money laundering and other illegal financial transactions if you aren’t careful. Know your Client standards help international companies understand their clients and anyone they do business with to ensure their money and accounts aren’t being used for criminal activity, terrorism, or fraud.

How Know your Customer Works

Below are the steps every financial institution must follow to Know your Customer and prevent fraudulent or illegal activity.

1. Confirm identityYou must know who the customer is beyond a reasonable doubt. In other words, ‘are they say who they say they are?’ Each country has its own requirements, but the overall premise is the same. You must know (and have proof) that the client is who he/she says they are. This requires extensive documentation collection and verification of provided records.
2. Do your due diligence – Beyond confirming a client’s identity, you must perform due diligence to ensure the person/business is legal and not a criminal, terrorist, or Politically Exposed Person. This means requesting personal identification documents, tax IDs, and business documents such as partnership agreements, business licenses, and information from third-parties such as consumer reporting agencies, or a public database.
Determining a client’s risk category also provides insight regarding whether the client needs ongoing monitoring. If you find a ‘red flag’ further due diligence and ongoing monitoring may be necessary.
3. Periodic and ongoing due diligence – Just because you initially screened a client doesn’t mean their situation can’t change. Whether they become more high risk or you missed initial red flags, ongoing due diligence further protects your practice from fraudulent transactions.

Who Must Use Know Your Client Procedures?

It used to be that only banks and financial institutions had to use KYC procedures, but today, all of the following must follow them to ensure protection from fraudulent activity.

1. Banking institutions
2. Insurance companies
3. Mortgage brokers
4. Pension and Mutual fund managers
5. All types of financial intermediaries
6. Audit and accounting firms
7. Lawyers and providers of any type of legal consultancy services
8. Notaries
9. Postal services

What are the elements under KYC Checklists?

Through the KYC checklist, you will be able to collect details information about your customers. So, you need to structure your KYC checklist considering the information you require about your potential clients for ensuring the safety of your organization.

Now you already know that KYC checklists can be customized from business to business. Followings are the basic KYC checklists that you can put in your KYC form for your institutional clients.

1. Details about the company of your client (company address, registration number, license, legal status, VAT/TIN etc.);
2. Details about the owners (Name, address, phone number, TAX identification numbers, passports, driving licenses of the owners or directors);
3. Information regarding bank account (account no, types of accounts, name and branch of the bank, controller of the bank account etc.);
4. Contact details about the client (Address, contact number, e-mail, passport, IRD number of the personal representative of the institutional client with whom you will contact).

What are the KYC documents for individual identification and address verification?

National Identity card;
Debit/credit/master cards;
License of the company;
Driving license of the primary contacts;
Utility bills for verifying the address provided by the client;
Bank statements for getting an idea regarding the source of wealth of the clients;
Lists of screening sanctions;
Certification or documentation of the ultimate beneficial owners;
TIN certificates;
Any governmentissued certificates.

How can File Request Pro can Help

File Request Pro stores, shares, and manages files for its customers in real-time.  At File Request Pro, we make the KYC process quick and painless, keeping everyone on the same page in real-time.

Thanks to the customer upload portal feature, you have the latest information about each client as quickly as possible. This enables you to make fast decisions regarding your next steps to protect your organization from fraud and other criminal activities.