Know Your Customer (KYC) Guidelines for Banks

Introduction

The Financial Action Task Force (FATF) has recommended a set of guidelines for banks to conduct Know Your Customer (KYC) procedures. These guidelines aim to ensure that banks conduct thorough customer identification and due diligence to prevent money laundering and terrorist financing.

Enhanced Diligence Procedures

• Customers who have been refused banking facilities elsewhere: If a bank suspects that an applicant has been refused banking facilities by another bank, it should apply enhanced diligence procedures to the customer.
• Introduction of new business: Relying on due diligence procedures conducted by other banks or introducers does not remove the ultimate responsibility of the recipient bank to know its customers and their business.

Customer Identification and Due Diligence

No Anonymous Accounts

Banks should not open accounts or conduct business with customers who insist on anonymity or provide fictitious names.

Numbered Accounts

• While numbered accounts can offer additional protection for the identity of account holders, banks must still know the identity of a sufficient number of staff to operate proper due diligence.

Trust, Nominee, and Fiduciary Accounts

Banks should establish whether customers are using these types of accounts to circumvent customer identification procedures. They must receive satisfactory evidence of the identity of intermediaries and beneficiaries.

Corporate Vehicles

Banks need to be vigilant in preventing corporate business entities from being used as a method of operating anonymous accounts. They should understand the structure of the company, determine the source of funds, and identify beneficial owners and those who have control over funds.

Nominee Shareholders and Bearer Shares

Special care is needed when dealing with companies that have nominee shareholders or shares in bearer form. Banks must obtain satisfactory evidence of the identity of beneficial owners.

Conclusion

These guidelines emphasize the importance of thorough customer identification and due diligence for banks to prevent money laundering and terrorist financing. By following these guidelines, banks can ensure that they are conducting their business in a responsible and secure manner.