Financial Crime World

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Know Your Customer (KYC): Understanding the Requirements

The main aim of Know Your Customer (KYC) is to prevent and combat money laundering by ensuring that financial institutions know the identity and background of their customers.

Basic Customer Due Diligence Requirements

To comply with KYC regulations, the following are the high-level requirements:

  • Identify the customer: Gather accurate information about the customer.
  • Verify the customer’s identity: Use one or more reliable, independent sources to confirm the information.
  • Obtain identification documentation and other relevant data: Get documents that prove the customer’s identity and business relationships.
  • Understand the purpose and nature of the business relationship: Gather information on why the customer is opening an account or entering into a business relationship with your institution.

Verifying a Customer’s Identity

To verify a customer’s identity, you must:

  1. Identify the customer
  2. Verify their identity using one or more reliable sources
  3. Obtain identification documentation and other relevant data about each individual customer and their business relationships

Additional Requirements for Verifying a Customer’s Identity

You also need to obtain identification documentation and other relevant data about each individual customer and their business relationships.

Ongoing Monitoring of Business Relationships

To monitor transactions, you must:

  1. Ensure that they are consistent with the customer’s business or profession
  2. Carry out regular reviews of the customer’s account and business relationship
  3. Obtain information on the purpose and nature of the business relationship

Verification of Politically Exposed Persons (PEPs)

To verify PEPs, you must:

  1. Identify them
  2. Verify their identity and source of funds
  3. Obtain identification documentation and other relevant data about each individual PEP and their business relationships.

Reporting Suspicious Transactions

If there is suspicion or reasonable grounds to suspect that any property is the proceeds of crime, or is related to or linked to, or is to be used for terrorism, terrorist acts or by terrorist organisations or persons who financed terrorism, you must report it to the Centre.

Obligations in Reporting Suspicious Transactions

Financial institutions must report to the Centre where there is suspicion or reasonable grounds to suspect that any property is the proceeds of crime, or is related to or linked to, or is to be used for terrorism, terrorist acts or by terrorist organisations or persons who financed terrorism.

Penalties for Non-Compliance

  • Any person who knows or suspects that an investigation into money laundering has been, is being or is about to be conducted without lawful authority divulges that fact or information to another person shall be guilty of an offence and shall be liable upon conviction to a fine not exceeding one hundred and thirty-nine thousand penalty units (approximately ZMK25,020,000) or to imprisonment for a term not exceeding five years or to both.
  • Financial Intelligence Centre Act states that the penalties for tipping off upon convictions shall be liable to a fine not exceeding five hundred thousand penalty units (approximately ZMK90,000,000) or to imprisonment for a period not exceeding five years, or to both.