Know Your Client (KYC)

What is the Know Your Client (KYC) mandate? #

Know your client, also known as KYC, is a standard in the financial services industry that requires professionals to verify the identity, suitability, and risks involved with maintaining a business relationship. KYC consists of a series of due diligence activities that financial institutions and other regulated companies must perform to understand the nature of their client's activities, including an assessment of the risks of illegal intentions such as money laundering or financing terrorism.

By collecting and verifying detailed information from clients, such as personal identification documents and financial records, advisors and companies ensure that they are dealing with legitimate entities and individuals. This process mitigates financial risks and ensures compliance with other legal requirements, such as anti-money laundering (AML) regulations.

Know Your Client Requirement
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Know Your Client (KYC) compliance involves several key requirements that financial institutions and regulated businesses must adhere to in order to verify the identity and legitimacy of their clients.

These requirements include:

1. Customer Identification Program (CIP): Collecting basic identifying information such as name, date of birth, address, and identification number. This step often involves verifying documents like passports, driver's licenses, or other government-issued IDs.
2. Customer Due Diligence (CDD): Conducting thorough background checks to assess the risk profile of a client. This includes understanding the nature of the client’s business, their financial history, and the source of their funds.
3. Ongoing Monitoring: Continuously monitoring client transactions and activities to identify and report suspicious behavior.
4. Enhanced Due Diligence (EDD): Implementing additional verification measures for higher-risk clients.
5. Record Keeping: Maintaining detailed records of all KYC activities and client interactions. These records must be stored securely and made available for regulatory review as needed.
6. Reporting: Reporting any suspicious activity to relevant authorities in compliance with AML regulations