The Importance of Transaction Monitoring and SAR-STR Filing for Anti-Money Laundering Compliances
Contents Why is Transaction Monitoring Important? AML Transaction Moni...
IDMERIT’s KYC Platform for Business and Consumer applications
Know Your Customer (KYC) is a process where businesses must verify the identities of their clients. This gives businesses the ability to accurately assess the potential risk associated with doing business with a specific client.
The History of KYC Regulations
KYC regulations were put in place when the Patriot Act was passed in 2001. The legislation did not state specific standards that should be used to verify customers. Regulators thought that by doing this, they would prevent businesses from simply striving to meet the basic requirements for KYC. This has caused many businesses to create individualized procedures in place to meet KYC. Banks and other businesses do this to prevent large financial fines.
Why is KYC Important
KYC processes are a key component for monitoring customer risk. They are also a requirement for effective anti-money laundering (AML) compliance. If an effective KYC process is not put in place, this can lead to hefty fines, sanctions or even public ridicule.
KYC is meant to address the following issues:
- Establish customer identity
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Understand the motivation behind a customer’s activities
- The goal here is to understand if a customer’s funds are legitimate or not
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Determine the money laundering risk associated with a particular customer
- This helps assess how closely a customer should be monitored by a business
IDMERIT’s effective KYC solutions
In order to maintain a complete digital eKYC process, these steps must be taken by a business:
Develop a Customer Identification Program (CIP)
Identity theft is a threat for many people this day and age. This means criminals might use legitimate customer information to access and create accounts online. To deter this from happening, having a system in place to know your customer before they sign up for an account is essential. This allows a business to know more about who they are doing business with before the business relationship even starts.
CIP requires that individuals who conduct financial transactions must have their identities verified. It is aimed at preventing money laundering, terrorism financing, corruption and other illegal financial activities from happening. CIP requires all financial institutions to get to know their potential customers and assess their risk level during the onboarding process.
Maintain Customer Due Diligence
Financial institutions are the ones most affected by KYC. Customer due diligence (CDD) is a critical part of the KYC process. CDD helps protect businesses from criminals, terrorists or Politically Exposed Persons (PEPs). There are three types of due diligence:
Simplified Due Diligence are situations where there is low risk of money laundering or terrorist financing associated with a customer account so CDD is not necessary
Basic Customer Due Diligence is where information is obtained from all customers for the purpose of identity verification and risk assessment
Enhanced Due Diligence is where additional information is collected from higher-risk customers. This gives businesses a deeper understanding of the customer’s activity and how they can mitigate the risk associated with that customer
Ongoing Monitoring
Performing a KYC check during onboarding is great but it is not the only time a KYC check should occur. KYC checks should take place throughout the time a customer account is active. This will give businesses the opportunity to continually assess whether they are doing business with nefarious characters or not.
Superior Data for KYC
IDMERIT has access to official data sources in over 90+ countries. This means IDMERIT can delve more deeply into the individuals being checked and assess risk based on key indicators. These indicators will flag potential problems pertaining to money laundering, fraud and the possibility of misdirection of funds to finance terrorism. IDMERIT can further assist global businesses by delineating compliance regulations and best practices by region or specific country as regulatory legislation varies.
KYC Platform Solutions
KYC, which is used mostly in verifying identity for fraud and risk management and background checks, should not be overlooked. It is an important process for creating revenue through a seamless customer service process. IDMERIT’s KYC Platform offers easy integration with any online system and can be customized for your specific needs to accommodate to all B2B and B2C applications. IDMERIT provides a variety of solutions meant to address key problems within various components of the KYC process.