Know Your Customer, or KYC for short, is the process of confirming your customer’s identity, that they are wanting to do business for legitimate purposes, and that they are safe to deal with.
KYC is employed for a number of reasons such as protecting against dealing with fraudsters or as part of credit risk/credit approval processes. But in the UK it is most commonly performed as part of a company in the regulated industry’s anti-money laundering compliance processes.
Unfortunately, these regulations are vague and offer little guidance as to how regulate companies should achieve this compliance and avoid the fines and reputational harm caused by being found to be in breach.
Whilst every company’s processes will look different, there are some straightforward steps you can take to building an effective, efficient, and compliant KYC framework at your company.
This is a non-negotiable step that many companies completely misjudge the importance of; both in it necessity to allow them to construct proper processes and in the importance that regulators place in it.
Your companywide risk assessment should identify every internal and external risk to being exploited by money launderers and serve as the foundations for you to build your AML defences. As such it will be the first thing that any regulator assessing your compliance will ask to see.
We could write an entire article on how to perform a companywide risk assessment, but in short you must look at every aspect of your business and how a money launderer could exploit them. Such as:
You should make sure your assessment is as detailed as possible and keep notes on how you performed it. It should then be reassessed every 12-18 months or if your company experiences any significant changes.
A good tip is to ensure it is easily accessible to all senior and relevant staff, and that they know how to access it, as assessors can judge you on this.
Every company under UK AML regulations must appoint a Money Laundering Reporting Officer. Despite the name, MLROs are not just responsible for external reporting but rather take responsibility for and oversee everything AML related at the company. Such as:
Due to the access needed to perform this role, it is usually done by a member of the board, a member of senior leadership, or the head of risk.
Now you have identified the areas of your business at risk of being used to facilitate money laundering, through your companywide risk assessment, and chosen a MLRO to own your AML processes. The next step is to design your AML processes.
When doing so it is important to consider the following:
Ultimately, these processes must fit in with the practical running of your company as well as fully meeting compliance standards. If they are too convoluted, difficult for staff, or excessively slow down business then they will, in all likelihood, not be carried out fully by staff or cause harm to your revenue.
It is up to every company to design its own processes, and each will look different, but some things that must be included are:
In all cases it is best to have digital checking tools to increase the accuracy of your AML checks, speed up the process, and reduce your staffs’ workload.
Once you have your processes in place, the next step is to give your staff training on both how to complete them but also AML in a wider context. Money laundering is something that almost everyone has heard of but very few will have any understanding of how it is carried out and by whom.
Having staff who know how to run a customer through a process is meaningless if they do not know what the process is for, or what they need to be looking for.
UK AML law stipulates that a risk based approach must be adopted towards AML. For this to be effective, there needs to be a well trained individual who is actually able to assess risk carrying it out.
Relying on manual processes to perform your AML requirements is outdated and impractical. Not only does it add days on to your sales process but it is highly inaccurate, with the majority of money laundering techniques relying on there being a person who can be fooled as part of the process.
In contrast, digital AML tools offer near foolproof checks that do not slow down your process.
Our fully digital AML platform has been specifically designed to allow you to have rock solid and compliant AML processes without slowing down your business process or inconveniencing your clients.
Our AI powered checks take just 30 seconds of staff time to send out and are completed on your customers device in just 60 seconds. Meaning that a deal can be agreed and your client onboarded and ready to deal with in less than two minutes.
What’s more, we send out our checks in your company name and with your branding, so you can provide a truly seamless onboarding journey.
To find out more about the many other ways our cutting edge AML tool will benefit your business, speak to an expert today for a demonstration.