Know Your Customer (KYC) is the process of obtaining information and data in order to authenticate clients' identities and ensure that they are not involved in money laundering or other financial crimes.
The following are the best KYC practises:
- Make sure the customer is who he says he is.
- Identify the nature of the client's activity.
- Evaluate the money laundering risks associated with that customer in order to keep track of their activities.
What is KYC Enhanced Due Diligence, and how does it work?
Enhanced Due Diligence (EDD) is a variation on the KYC process of gathering data and information to authenticate a client's identification, but with extra information necessary to lessen the client's risk. Regular KYC policies are distinguished from EDD policies by a number of criteria. EDD rules are regarded as "rigorous and robust," implying that they need the collection of substantially more proof and thorough information.
The whole EDD process must be well recorded, and regulators should have rapid access to the information. Professionals are frequently recruited to analyse data obtained from clients, and the credibility of information sources is critical.
When computing a KYC risk assessment, EDD also wants "reasonable certainty." This means that the experts in charge of making a choice must have gone through all of the essential research stages and used professional expertise and care in arriving at their conclusion.
EDD takes into account any pertinent negative facts. Any information relating to money laundering or corruption, whether it is found in an official document or on the Internet, must be carefully evaluated. There is no place for forbearance when clients or transactions are substantial enough to justify EDD, and no chances should be taken.
The same rules that apply to ordinary KYC processes also apply to EDD. Any suspicious activity discovered by a firm or institution must always be reported to authorities. Furthermore, constant monitoring is essential, and the usage of compliance software is strongly recommended.
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