Do you know your customer?
You need to if you are a Reporting Entity under New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism Act 2009 or you face possible fines, sanctions and maybe even public ridicule if you do business with a money launderer or associated criminal. More importantly, it’s a fundamental practice to protect your business from fraud and losses due to illegal funds and transactions.
“KYC” refers to the steps taken by a Reporting Entity (or business) to:
· Establish customer identity
· Understand the nature of the customer’s activities (primary goal is to satisfy that the source of the customer’s funds is legitimate)
· Assess money laundering risks associated with that customer for purposes of monitoring the customer’s activities
To create and run an effective KYC program requires the following elements:
1) Customer Identification Program (CIP)
How do you know someone is who they say they are? After all, identity theft is widespread affecting thousands of Kiwi’s every year. If you’re a New Zealand Reporting Entity under the Act, it’s more than a financial risk; it’s the Law.
The CIP mandates that any individual conducting financial transactions needs to have their identity verified. As a provision in the Act, it’s designed to limit money laundering, terrorism funding, corruption and other illegal activities. The desired outcome is that Reporting Entities accurately identify their customers:
A critical element to a successful CIP is a risk assessment, both on the institutional level and on procedures for each account. While the CIP provides guidance, it’s up to the individual organisation to determine the exact level of risk and policy for that risk level.
2) Customer Due Diligence
For any Reporting Entity, one of the first analysis made is to determine if you can trust a potential client. You need to make sure any potential customer is worthy; customer due diligence (CDD) is a critical element of effectively managing your risks and protecting yourself against criminals, terrorists, and corrupt Politically Exposed Persons (PEPs).
There are three levels of due diligence:
Standard Customer Due Diligence (“CDD”) is information obtained for all customers to verify the identity of a customer and asses the risks associated with that customer
Simplified Due Diligence (“SDD”) are situations where the risk for money laundering or terrorist funding is low and a full CDD is not necessary. For example, low value accounts or accounts where checks are being on other levels
Enhanced Due Diligence (“EDD”) is additional information collected for higher-risk customers to provide a deeper understanding of customer activity to mitigate associated risks. In the end, while some EDD factors are specifically enshrined in a countries legislations, it’s up to a Reporting Entity to determine their risk and take measures to ensure that they are not dealing with bad customers.
It’s not enough to just check your customer once, you need to have a program that knows your customer on an ongoing basis. The ongoing monitoring function includes oversight of financial transactions and accounts based on thresholds developed as part of a customer’s risk profile.
Dimension GRC has real-time Know Your Customer functionality which checks your clients’ identification and enhanced due diligence requests against national and international databases ensuring you know your customer….all in real time saving you time and money.
Offering peace of mind you can feel assured you:
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