Financial Crime World

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TIMOR: Know Your Customer Process Crucial in Combatting Financial Crime

In a bid to combat illegal activities that use the financial industry to move or hide money, the government of Timor has been growing the remit and reach of its Know Your Customer (KYC) policies. This increased focus on KYC is partially due to the growing prevalence of financial crime across the world today.

The increased connections between financial organisations and corporate companies across countries and territories have made it more difficult to stop and prevent illegal financial activities. Regulators in Timor have adapted and strengthened KYC checks to keep pace with these changes.

Traditional KYC Processes

Financial institutions in Timor start the KYC process by asking customers to provide a range of basic information about their business operations and individuals. This includes:

  • Names of directors
  • Business addresses
  • National insurance or social security numbers
  • Company numbers
  • And more

This information is supplemented with publicly available information from open sources.

The KYC information is then compared to lists of individuals and organisations known to governments and law enforcement agencies. These lists aim to identify suspected criminal activities, provide intelligence on companies or individuals suspected of money laundering or bribery, and identify Politically Exposed Persons (PEPs).

A Risk-Based Approach

After comparing the collected KYC information with relevant lists, a financial institution will decide whether they can do business with an entity. If an entity passes necessary checks, it is given a risk rating based on its likelihood to pass future KYC checks.

Entities with a high-risk rating may require enhanced due diligence (EDD). Risk factors include:

  • Companies based in sanctioned territories
  • Directors or executives who are PEPs
  • Companies with inadequate anti-money laundering systems

The Rise of KYC Registries

Completing KYC checks on all customers puts a costly burden on financial institutions. The idea of a central KYC registry has recently promised to solve much of this headache for financial institutions and their customers.

A KYC registry is a central repository that stores and keeps up-to-date necessary KYC information, allowing financial institutions to log in and consume the information they need at any time. Registries such as Swift’s own KYC Registry allow the standardised exchange of nearly all KYC information, greatly reducing the burden on both financial institutions and corporate customers.

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