Jordan’s KYC Requirements for Financial Institutions: A Risk-Based Approach to Combat Money Laundering

Jordan has taken significant steps to combat money laundering and terrorist financing by implementing robust Know Your Customer (KYC) regulations for financial institutions. The country’s government has recognized the importance of a risk-based approach in ensuring that financial institutions are aware of their customers’ identities, risks, and legitimate purposes.

The Importance of Risk-Based Approach

According to the Financial Action Task Force (FATF), reliable digital identification can significantly simplify individual customer verification, reducing costs, increasing convenience, and enhancing security. Digital IDs can also help providers meet transaction monitoring requirements and largely avoid human error-related risks.

However, FATF cautions against a one-size-fits-all approach, recommending that financial institutions tailor their KYC measures to the specific risks associated with different customers. A risk-based approach ensures that low-income users are not excluded from accessing financial services, as overly rigid approaches could effectively exclude many potential banking and finance customers.

Jordan’s Unified Digital Identity Solution

Jordan’s Central Bank has introduced a unified digital identity solution to provide citizens with reliable and verifiable ID for multiple services, including financial transactions. The regulator encourages a risk-based approach, allowing service providers to develop solutions for specific risks and seek additional guidance from the regulator as needed.

KYC Requirements for Financial Institutions

Each financial institution in Jordan must ensure that it knows its clients and has obtained suitable documentation and answers to relevant questions. While government-approved identities are considered stronger, non-government approved IDs can still be accepted if they meet certain criteria.

• Suitable documentation may include:
  • Government-issued ID
  • Passport
  • Birth certificate
  • Proof of address
• Relevant questions may include:
  • Source of income
  • Occupation
  • Purpose of account

Conclusion

In conclusion, Jordan’s KYC regulations prioritize a risk-based approach, recognizing the importance of flexibility in ensuring financial inclusion while combating money laundering and terrorist financing. The country’s efforts demonstrate its commitment to creating a secure and inclusive financial environment for all citizens.