Know Your Client
Anti-Money Laundering (AML) is a broader and more holistic practice than Know Your Client (KYC). AML compliance is the comprehensive set of policies that the Kayndrex Foundation applies to prevent criminal infiltration, money laundering, terrorism financing, human trafficking and more. KYC is an important part of AML for the foundation, its subsidiaries and related companies.
KYC is the regulatory process in which we verify a client’s identity by assessing their credentials. KYC policies allow us to better comprehend our clients and their clients’ financial dealings, which assists to effectively mitigate and manage risks.
Our AML compliance programme has many steps, and KYC is the first one. KYC is the process applied to verify a client’s identity and comprehend their risk profile, but there are more steps necessary to completely prevent financial crimes.
A complete AML compliance programme includes KYC procedure as an initial step to verify a client’s identity, manage their risk factors, and monitor their accounts. KYC is the most crucial step in our AML policy. It is important to carefully verify a client’s identity, assess their risk, comprehend a client’s general financial habits, and have the necessary procedures in place to catch abnormalities. Strong AML compliance policies allow us easily find and remove risks as they arise.
There are three components of KYC compliance:
The first pillar of a KYC compliance policy is the client identification programme (CIP). CIPs verify the client’s identity applying credentials such as their name, date of birth, address, or ID number.
The second pillar of KYC compliance policy is client due diligence (CDD). CDD is a KYC process in which all of a client’s credentials are collected to verify their identity and evaluate their risk profile. It is grouped into two tiers: simplified due diligence (SDD) and enhanced due diligence (EDD). SDD is applied for accounts at low risk for money laundering or terrorism funding. EDD is applied for clients that are at a higher of infiltration, terrorism financing or money laundering. If a client is determined to be a higher risk, additional information collection is necessary. EDD procedures also include transaction monitoring. It is important to keep track of the typical amount and frequency of a client’s transactions to better find irregularities. It is the financial institution’s responsibility to determine each client’s risk profile to determine if SDD or EDD is necessary.
The third pillar of KYC policy is continuous monitoring. Checking a client once isn’t sufficient to ensure security. Comprehending a client’s typical account activity and monitoring the activity is necessary to catch irregularities and eliminate risks as they arise.