Finnish Financial Institutions Strengthen Know Your Customer Policies

Introduction

Helsinki, Finland - In a move to enhance transparency and prevent financial crimes, Finnish financial institutions will be redefining their Know Your Customer (KYC) policies in line with recent reforms of the Finnish Money Laundering Act. From January 2018, Finnvera, a leading Finnish export credit agency, will introduce more systematic and documented customer due diligence practices towards customers and other parties to funding projects.

What Does Know Your Customer Mean?

In concrete terms, KYC refers to the duty of financial institutions to recognize and know their customers, including identifying data, ownership structure, and nature of business operations. This includes registering customer information in public registers and databases, as well as conducting background checks on risk factors such as negative news, authority penalties, or appearance on sanction lists.

• Key components of KYC:
  • Identifying data
  • Ownership structure
  • Nature of business operations
  • Registration in public registers and databases
  • Background checks on risk factors

Enhanced KYC Obligations for Third Parties

From June 2018, Finnvera’s KYC policy will also cover buyer clients of export companies, known as “third parties.” This means that buyers and other necessary parties involved in funding projects with a guarantee duration exceeding two years will be subjected to an investigation of the risk of damage to reputation.

• Third-party obligations:
  • Buyer clients of export companies
  • Parties involved in funding projects with a guarantee duration exceeding two years

Impact on Customers and Other Parties

Finnvera will require more information from customers and other parties to funding projects. The agency uses publicly available data and databases, aiming to minimize additional work for its clients. Background studies conducted by Finnvera may also benefit other parties involved in the project, as the agency is allowed to exchange information with participating banks.

• Customer and third-party obligations:
  • Provision of additional information
  • Participation in background studies

Risk Assessment and Case-by-Case Approach

In cases where negative news or issues are revealed about a borrower company or other party, Finnvera will assess the risk on a case-by-case basis. The agency may refuse to grant a guarantee if the risk is deemed too high. However, this decision will be made after evaluating factors such as the relevance of the issue, corrective actions taken by the company, and potential impact on the project.

• Risk assessment:
  • Case-by-case approach
  • Evaluation of negative news or issues
  • Assessment of risk

Global Trend Towards Enhanced KYC Obligations

Finnvera’s updated KYC policy aligns with international best practices and the models of other Nordic export credit agencies. The trend towards enhanced KYC obligations reflects a growing emphasis on responsible financing operations and risk management in the global financial sector.

• International alignment:
  • Alignment with international best practices
  • Models of other Nordic export credit agencies

Contact Information

For more information, please contact Anne Haataja, Compliance Officer at Finnvera, tel. +358 29 460 2852.