Know Your Customer Process Crucial in Ireland’s Financial Sector
The Know Your Customer (KYC) process has become an essential component in Ireland’s financial sector, enabling banks and other financial institutions to verify the identity of their customers and ensure they are operating legally. The KYC process involves confirming the identity of organizations and individuals, as well as checking for any links to illegal activities such as money laundering, terrorist financing, or corruption.
The Growing Importance of KYC
The increased focus on KYC is largely driven by the growing prevalence of financial crime globally and the increasing connections between financial institutions and corporate companies across countries. Regulators have responded by strengthening KYC checks to keep pace with the evolving threat landscape.
Traditional KYC Processes
Financial institutions begin the KYC process by requesting basic information from customers, including:
- Names
- Business addresses
- National insurance numbers
- Company numbers
- And more
This information is supplemented with publicly available data from sources such as:
- Company registration numbers
- Stock exchange listings
- Annual reports
The collected information is then compared to lists of individuals and organizations known to governments and law enforcement agencies, which aim to identify suspected criminal activity, international sanctions, bribery or money laundering, and Politically Exposed Persons (PEPs).
Risk-Based Approach
After verifying the KYC information, financial institutions assign a risk rating to customers based on their likelihood of passing future checks. Those deemed high-risk are subject to enhanced due diligence (EDD) procedures.
Risk factors include:
- Companies operating in sanctioned territories or countries with high corruption rates
- PEPs among directors or executives
- Companies with complex ownership structures
The Rise of KYC Registries
Completing KYC checks on all customers can be costly and burdensome for financial institutions. The need to repeat these checks as company details evolve over time adds to the complexity. A central KYC registry has been proposed as a solution, allowing financial institutions to access updated customer information in real-time.
Swift’s own KYC Registry is an example of such a system, which enables the standardized exchange of nearly all KYC information and reduces the burden on both financial institutions and corporate customers.