Montserrat Financial Firms Upgrade “Know Your Customer” Guidelines to Fight Financial Crime

In an effort to combat the multi-trillion-dollar financial crime industry, Montserrat-based financial institutions and businesses are significantly enhancing their “Know Your Customer” (KYC) efforts. The KYC guidelines serve as a set of rules for firms to verify the identity, suitability, and risks associated with current or potential customers.

A Brief History of KYC Guidelines

The KYC regulations originated in 1970 when the US passed the Bank Secrecy Act (BSA) to prevent money laundering. Subsequent additions were made after the September 11, 2001 terrorist attacks and the 2008 global financial crisis. The guidelines require firms to regularly monitor client behavior, with no exception for non-compliance.

The Three-Step Framework

To “Know Your Customer”, Montserrat-based firms must follow a three-step framework:

Step 1: Customer Identification Program (CIP)

• Collect at least four pieces of identifying information about clients:
  • Name
  • Date of birth
  • Address
  • Identification number
• Many firms take additional steps by screening clients against government sanction lists, politically exposed person (PEP) lists, and known terrorism lists.

Step 2: Customer Due Diligence (CDD)

• Classify all the information collected during the CIP to verify a customer’s identity and assess their riskiness.
• Examine the nature and beneficiaries of existing relationships to ensure consistency with historical customer information.

Step 3: Enhanced Due Diligence (EDD)

• Conduct enhanced due diligence on high-risk clients to gain a deeper understanding of their motivations.
  • Verify source of wealth
  • Detailed management reports
  • Relevant third-party research

Benefits of Implementing KYC Guidelines

By implementing these guidelines, Montserrat-based financial institutions can better identify suspicious behavior and prevent financial crimes such as:

• Money laundering
• Terrorism financing