Find out about due diligence software, creating workflows and building templates to get to know your customer.
But to start with we need an understanding of all the main elements of AML/CFT legislation. Let’s get to know the regulations implemented to try and stop criminals disguising their ill gotten gains?
The legislation is focused predominantly on banks, casinos, financial institutions, advisers, brokers, and some trust and company service providers.
Read on, as we give a quick break down the elements and associated acronyms.
Video from ed.ted.com.
AML stands for Anti Money Laundering and refers to a set of regulations, laws, and practices that are intended to help prevent criminals laundering their illegally acquired money. It aims to prevent them from conducting a transaction that will make their criminally gained money appear to have come from a legitimate, legal business.
Hold up, just in case, what do I do if I suspect a client or have seen a transaction that is suspicious, laundering money or financing terrorism?
KYC stands for Know Your Customer or Know Your Client and refers to the process of verifying your customer is who they say they are, and establishing what their requirements are as a client.
eKYC stands for Electronic Know Your Customer and refers to conducting the KYC process online, using software or platforms that enable the collection of data, forms and supporting documents.
It’s an ethical requirement in the financial and securities industry and ensures that companies and practitioners act in the best interest of the client by establishing their needs. A basic profile of their knowledge of investment,their risk tolerance, and just where they are financially is the goal of the process.
If you’ve conducting KYC for financial purposes you would gather data like:
If you’re conducting a basic level of KYC, at a personal level you would also need basic identification, contact and demographic data:
If you’re conducting basic KYC in a business to business environment have a look at this KYC checklist from. It could be and easy way for you to implement the process.
CDD stands for Customer Due Diligence and refers to the process of conducting a due diligence review of your customers.
Most companies use a third party provider to conduct Enhanced Customer Due Diligence during on-boarding. They help with independent research and validation of identity and Ultimate Beneficial Ownership. They can also provide platforms for the monitoring of transactions.
ECCD thresholds on monitoring and classifying of transactions vary by industry and country but cover: large cash transactions, cross border transactions and changes in payment sources.
Companies like Accuity provide access to global data and databases that can validate identity and ultimate beneficial ownership of financial institutions through their Bankers Almanac API .
A UBO or ultimate beneficial owner of a customer is defined as an individual (a natural person or persons) who ultimately owns or controls (directly or indirectly) the customer.
For example ABC Company may be your customer, but who benefits from the activities of ABC Company? Is owned by Albert, or a trust that Albert has formed for his mother, or is it a shell for criminal activity?
Ownership for the purposes of determining ultimate beneficial ownership means owning 25 per cent or more of the customer. So if Albert has more than a 25% ownership stake in ABC Company, you’ll need to conduct CDD and have him complete your KYC process.
For each and every beneficial owner with a 25% or larger controlling stake in the company, you’ll need to conduct KYC/CDD.
The definition of 'control' includes whether the control is exerted by means of trusts, agreements, arrangements, understandings or practices and whether or not the individual has control based on legal or equitable rights. It includes where an individual can exercise control through making decisions about financial and operating policies.
To start collecting details and data from your clients, use our beneficial ownership form.
PEPs stands for Politically Exposed People.
PEPs are treated differently from a data and privacy perspective.
There are three categories of PEPs.
Individuals who hold a function or a prominent public position in a government body domestically.
Think President, Prime Minister or Parliament.
Individuals who hold a function or a prominent public position in a government body of a foreign country.
Think Jacinda Ardern or Justin Trudeau.
Are individuals who hold a prominent public position or function in an international organisation.
Think Musk, Yvon Chournard or Christine Lagarde.
The FileInvite platform provides an intuitive secure client portal to your clients. Take a trial and see how you can seamlessly collect forms, data and conduct due diligence around your customers and suppliers.
Australian Legislation - You can find more information about AML and CFT legislation in Australia, here.
Canadian Legislation - You can find the full Proceeds of Crime (Money Laundering) and Terrorist Financing Act in Canada, here.
New Zealand Legislation - You can find more information about AML and CFT legislation in New Zealand, here.
United Kingdom Legislation - In the United Kingdom you can find more information from the National Crime Agency on money laundering and how to lodge a SAR - Suspicious Activity Report . You can find UK Money Laundering legislation, here.
United States Legislation - You can find information from the SEC about the Anti-Money Laundering (AML) Source Tool for Broker-Dealers, here.
KFC stands for Kentucky Fried Chicken - prepared using eleven secret herbs and spices. So secret, you can find them on wikipedia.
You may want to visit KFC as a reward to yourself for expanding your KDD - knowledge of due diligence.
Get to Know Your Chicken, add Avocado Mayo and Lettuce and finish with Extended Chocolate Double Dip ice cream. 👍.
NOTE: KFC, as far as our limited google search took us, is not related to AML/CFT in any way. Researching did make us hungry though. 😉
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