Financial institutions are required by regulatory organizations to conduct KYC procedures across the world before onboarding customers to prevent fraud, money laundering activities and financing of terrorism. KYC helps financial institutions to be compliant and enhance their credibility in the eyes of customers.
CIP – Client Identification Programs: the basic level of AML that authenticates and verifies client’s identities by the financial institution before onboarding the customer. Simple information to be collected includes: name, phone number, identity documents, proof of address etc.
CDD – Customer Due Diligence: financial institutions are held accountable for whether their customers are compliant with AML standards and need to conduct risk assessments of customers with the provided information. Financial institutions are also required to monitor accounts, detect and report potential financial crimes, on a continuous basis.
EDD – Enhanced Due Diligence: additional level of due diligence for high-risk customers includes ongoing AML monitoring of and countries’ and individuals’ sanctions and Politically Exposed Person (PEP) lists, as well as screening of Adverse Media. The due diligence process should be guided by information provided by AML regulators in the company’s jurisdiction.
KYC law is an increasingly complex issue for the financial industry. Financial institutions have to adhere to both international and local anti-money laundering regulations. Here are some of the policies in place in the EU and USA, two of the top three economies in size.
Europe: The European Union (EU) adopted the first anti-money laundering Directive in 1990 in order to prevent the misuse of the financial system for the purpose of money laundering. It indicates financial institutions are obliged to apply customer due diligence during onboarding procedures. It has been constantly revised in order to mitigate risks relating to money laundering and terrorist financing. In 2015, the EU adopted a modernised regulatory framework – the 5th Anti-Money Laundering Directive. More info.
US: The US AML laws and regulations started with the Bank Secrecy Act (BSA) that requires financial institutions to assist the US government to detect, monitor and investigate any potential money laundering activities by identifying suspicious transactions. The USA Patriot Act was passed into law soon after the September 2011 terrorist attacks which amended the BSA and required financial institutions to maintain more formal AML programmes.The Act also prohibited financial institutions from engaging in business with foreign shell banks and increased civil and criminal penalties for money laundering. More info.
FATF: The Financial Action Task Force (FATF) was established to develop policies among the G7 countries to counter global money laundering and terrorist financing. It is an inter-governmental body of 39 economically leading countries that sets international standards adopted by most countries and jurisdictions to fight financing for organized crime, corruption and terrorism. More info.
Blockpass provides financial institutions with an ideal solution for fast and secure KYC and AML compliance, and the ability to flexibly, quickly and easily manage identities. For individuals, Blockpass is a gateway to financial services and other regulated offerings, allowing one click, reusable KYC submission.
Blockpass alleviates the pain of opening new accounts and redoing KYC over and over. Once users create their identity profile the first time and get their identity document rapidly authenticated and KYC and AML checks done, they can instantly onboard to any business or service associated with Blockpass.
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