When it comes to
Know Your Customer (KYC) compliance, there are many rules and regulations that must be followed. If you do not follow these guidelines, then you may find yourself facing some reputational damage, hefty fines or even jail time! It's important for businesses to know what KYC is before they start a
business with the intent of engaging in financial transactions. This blog post will talk about how KYC relates to
financial institutions, as well as provide information on the improvement
process of KYC remediation if your
company has been found in violation of this regulation.
What is KYC?
Know Your Customer, is the
process of vetting a
business or corporate entity and its beneficiary owners for the purposes of
AML/KYC compliance obligations. Current compliance standards require
customers must verify their
identity, and have been vetted for criminal activities or transactions, like money laundering. When opening an account or processing transactions, it's important to know who you're dealing with. Corporations need to fill out a KYC form that asks questions about the
company and its officers. To avoid breaking the law, organizations must comply with stricter KYC regulations that were designed to prevent financial crime and other suspicious activity.
Defining KYC Remediation
KYC is a
process that
financial institutions go through to ensure they are following the rules and regulations laid out by the government. In order for an institution to comply, it must verify
identity of
customer profiles who initiate transactions on a regular basis or those who have engaged in large transactions over a period of time. If you fail to verify your
customers or are otherwise found in violation of KYC regulations, then there will be a remediation
process that is required by law. This can include warning letters as well as fines up to $2500 per day until the
company makes changes so it complies with the rules and regulations.
The KYC Remediation Process
KYC is the
process of updating and cleaning your client's data in order to stay updated with latest regulations. An efficient KYC remediation program is an improvement
process that can reduce your risk while also offering you insight into
your bank customer base and patrons.
Step 1: Identify outdated data and high-risk clients
The first step in remediation is to identify any older
customers who have not had transactions for a period of time. This could be due to the
customer's death, or they may simply have been avoiding contact with your
company. Additionally, it's important to know which of your
customers have engaged in more than one transaction. This will help you know which
customers are worth targeting first during the
process of remediation and whether or not they may be at risk for fines, as these types of clients generally require a higher level of verification to ensure compliance obligations with KYC rules and regulations.
Step 2: Automate KYC remediation for cleaning data
When it comes to complying with the KYC regulations, your
company should automate as much of the improvement
process as possible. This will allow you to focus on other areas within your organization that need attention while also improving
customer service levels for those who are initiating transactions on a regular basis or have engaged in large transaction over time. Automating the entire
process will ensure the data is updated more often and in a timely manner.
Step 3: Collect missing client identity data
You may have clients who are not providing you with their full name, date of birth or Social
Security number. You should get in contact with
customers because this information needs to be collected before your
company can go any further with updating records for those clients.
Step 4: Add clean data to CRM
Once all the appropriate information has been collected, then it's time to add that new and updated client
identity data into your company's
customer relationship management (CRM)
software. Updated client records will allow you to keep better track of where you are within compliance obligations as well as interact more efficiently with clients who are initiating transactions.
Know the KYC Regulations and Requirements
First things first, if you run or work for an institution that handles financial transactions, it's important to know what KYC regulations are so that you can comply with them. Simply put, KYC is a set of regulations that
financial institutions must follow in order to verify their clients and make sure they are not engaging in illegal activity. There are two parts to the
process: verification and remediation programs.
Verifying your
customers is an essential part of compliance because it helps you identify potential issues. You can do this by following up with any new
customers, as well as those who have made large transactions over a long period of time. If you're not sure if you need to confirm identification information for your clients, then it's best to err on the side of caution and ask them personally about their background, such as where they live and what's their occupation.
