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Madhura Phadtare
Madhura Phadtare
Madhura is a Certified Forensic Accounting Professional. She regularly contributes articles on the subjects of frauds, forensic accounting and investigation. She has rick experience of forensic accounting and fraud investigation research.

KYC and EDD plays a vital role in the AML domain. Know Your Customer is the due diligence and bank regulation which the financial institutions and other bodies shall perform to identify its potential clients. In the recent years Know Your Customer policy has came into existence as an important strategy to fight against money laundering. The financial Institutions inmost of the countries have to identify their clients. The main objective of this policy is to look after the originators of anti-economic crime that is taking place in the country. As well as keep a look on the audit trail of any money that flows in the banking system unknowingly.  However, a closer look at both the international and many of the national anti-money laundering strategies reveals that their regulatory instruments do not address both these purposes for combating money laundering.Therefore, KYC and EDD goes hand in hand.

Hence, for examination of customer risks, Know Your Customer is a critical component. “KYC” refers to the steps taken by financial institutions to:

  • Discover customer’s identity
  • Understand the activities of the customer
  • Perform a risk-based approach for monitoring the customer’s activities

Definition of KYC

Know Your Customer enables the banks to know their customers and their financial dealings to be able to serve them better. The term KYC can also reference the regulated bank practices that are similarly used to verify clients’ identities.  Banks and companies of all sizes have become big supporters of KYC. It is increasingly common for banking institutions, credit companies, and insurance agencies to require that their customers provide them with detailed information in order to ensure that they are not involved with corruption, bribery, or money laundering.

Importance of KYC in the Banks and Financial Institutions

The KYC procedure comes into existence when the bank customers open the account. The purpose of KYC is to reduce the risk of identity theft, money laundering, financial fraud, and the financing of criminal organizations. The importance of KYC in banks and other financial institutions have strong KYC procedures in place so they can ensure that their clients are not involved in money laundering or the financing of criminal organizations. 

Following are the elements for having an effective KYC in banks.

  • Customer Identification Program
  • Customer Due Diligence
  • Ongoing Monitoring

The importance of KYC is a complex undertaking that involves the collection of documents which show proof of identity (government issued IDs), establishing and verifying customer identity, and screening the identity information against political exposure, sanction lists, criminal lists, and unreliable customers lists.

Impact of KYC Compliance

KYC Know Your Customer regulations apply to financial service providers such as banks, payment companies. Know your client check, which is the first step of Anti-Money Laundering programs, also prevents the potential risks by verifying the customer identity. 

With the development of technology, crime techniques and risks also change. Financial institutions need to follow KYC regulations and Anti-Money Laundering laws to detect and prevent crime risks that organized crime organizations have developed using technology.

Enhanced Due Diligence

International definition of Enhanced Due Diligence is not provided. As a result, the financial institutions are at a very large risk. KYC and EDD are the 2 important concepts.  Enhanced Due Diligence means an advanced KYC due diligence process that provides further risk investigation. It highlights the risk that regular customer due diligence process will never reflect.

This is an ongoing process the existing customer has the potential transition into higher risk categories. High-risk entities are haunt by the financial sector. A major problem during EDD is understanding how much information about a customer is necessary.

Factors of Enhanced Due Diligence

Following are the EDD factors:

  • Customer Jurisdiction
  • Nature of Customer Business
  • Customer activity
  • Customer Transaction Value
  • Payment Methods

Enhanced Due Diligence in Banking Sector

The banking industry is very dynamic. Regulations and technologies in this sector are changing very fatly. EDD plays a vital role in the banking sector.  High-risk corporates such as banks need to control the Enhanced Client Due Diligence program carefully. These measures are preferred by banks to avoid penalties for money laundering. As well as to avoid penalties for non-compliance with regulations, and even to protect their reputation.

Overview of Certified Anti-Money Laundering Professional Program

Riskpro Learning has launched a new certification program named Certified Anti-Money Laundering Professional (CAMP) for the compliance, AML professionals to meet the regulatory needs in the emerging market environment. Certified Anti-Money Laundering Professional regarded as one of the best international certifications in the AML domain. To gain the global recognition for the course, Riskpro Learning Academy has entered into the agreement to offer certification program to the global compliance officers.

The Certified Anti-Money Laundering Professional Program is a very unique certification program. It offers a lot of benefits and flexibilities to the international community who are working in the AML, compliance domain. Certified Anti-Money Laundering is interesting experience for the compliance professionals.

The aim of launching this program is to put forth KYC and EDD aspects. This program covers the 2 aspects. KYC aspect will enhance the knowledge of KYC. Hence, KYC and EDD is the crucial aspect in CAMP program. The aspirants will also get to know the different types of KYC requirement. Enhanced Due Diligence is another aspect that is covered in this program. How EDD reviews are conducted is covered in this aspect.

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