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Argentina’s Financial Institutions Embracing Perpetual Know Your Customer (KYC) Procedures

Introduction

In response to an exponential increase in money laundering and terrorist financing activities worldwide, financial institutions in Argentina are adopting more robust customer due diligence practices. This shift is driven by the need for perpetual Know Your Customer (KYC) procedures, which require continuous monitoring of customers’ risk profiles.

Market Drivers Contributing to Perpetual KYC Requirements

The Argentine government has implemented various regulations to combat money laundering and terrorist financing. Financial institutions are under pressure to comply with these regulations, which demand more comprehensive customer due diligence practices. The use of technology has made it easier for financial institutions to collect, store, and analyze vast amounts of customer data.

Challenges in Implementing Perpetual KYC Frameworks

Financial institutions in Argentina face several challenges when implementing perpetual KYC frameworks, including:

• Non-standardization of the KYC model: The lack of a standardized KYC model across financial institutions creates difficulties in ensuring compliance with regulations.
• Incomplete data capture during onboarding: Financial institutions often capture only mandatory customer data points during the onboarding process, which can lead to reduced accuracy in adverse media matches.
• Limitations of publicly available sources: Customer data gathered from public sources may be inaccurate, incomplete, or unconfirmed.

Essential Elements of a Robust KYC Framework

Financial institutions should follow these essential steps to build a stable, scalable perpetual KYC framework:

• Acquire and scrutinize identification documents: Verify that customers are not part of any sanctions list.
• Implement customer due diligence measures: Collect all available data on the customer from trusted sources, determine the purpose and intended nature of the business relationship, and continuous periodic monitoring of relationships to ensure activities are consistent with the customer’s risk profile.
• Schedule KYC re-reviews based on customer risk profiles: The highest-risk customers should be screened annually or more frequently, medium-risk customers every three years, and lowest-risk customers every five years.

A Recommended Approach for Successful Implementation

Financial institutions can establish a successful perpetual KYC program by focusing on:

• Data sourcing: Continuously monitor internal and external data changes that may impact the customer’s profile.
• Data consolidation and enrichment: Collect, cleanse, and enrich the dataset to ensure accuracy and relevance.
• Utilizing data for customer due diligence: Apply defined events such as frequent negative news, criminal court orders, or new business relationships with sanctioned countries to trigger the customer due diligence process.

Conclusion

In conclusion, Argentina’s financial institutions are embracing perpetual KYC procedures to comply with regulatory requirements and prevent money laundering and terrorist financing activities. By implementing robust and scalable perpetual KYC frameworks, financial institutions can ensure a stable and secure environment for their customers and stakeholders.