The term KYC, know your client, popularised over the recent years amongst businesses. However, several steps are required to ensure the client is not at high risk. Our compliance experts outline the procedures in the following article.  

What is KYC?

KYC is a due diligence process in which a business entity gathers information on the client to have a safe and confident business relationship. These procedures are usually used to assess customer risk and to be compliant with various AML laws. The most effective strategies are knowing the customer’s identity, their financial status and any money laundering and terrorist financing risk they might impose. 

The KYC Process:

The KYC process is performed by following three main steps; (i) Customer Identification Programme (CIP), (ii) Customer Due Diligence (CDD) and (iii) Ongoing Monitoring. The CIP is achieved by following the onboarding process. It involves submitting an onboarding form, politically exposed person (PEP) declaration form, and requesting a true certified copy of ID or passport. However, since a passport does not include the residential address of the individual, subject persons must request a utility bill issued within the last six months to verify that the person has a residential address. The last document requested at this stage is a company organigram to understand the company’s structure better. 

CDD is a process used to mitigate any potential risks that the client, who can either be a legal entity or a natural person, may pose. Most entities make use of a Risk-Based Approach (RBA), which assesses the level of risk. Part of the RBA is using a Customer Risk Assessment (CRA) which helps subject persons determine whether the customer is of low, medium or high risk. It is essential as it determines which documents are to be requested and the level of due diligence to be applied. 

The last stage is ongoing monitoring. It maintains both ongoing and onboarding customers by reviewing financial transactions and accounts based on the customer’s risk profile. It is also a crucial step when it comes to KYC. 

Why GCS Malta?

The experts at GCS Malta can ensure your KYC checks are correct and avoid unnecessary hassle. Contact us today for more information.  

Article written by Michael Sant.