Implementing Know Your Customer (KYC) Requirements in Jordanian Financial Institutions to Combat Money Laundering and Terrorist Financing
Introduction
In recent years, the global surge in money laundering and terrorist financing activities has put increasing pressure on Jordanian financial institutions to strengthen their customer due diligence practices. The COVID-19 pandemic has further exacerbated these challenges, with the emergence of digital lenders, peer-to-peer lending platforms, and other fintech innovations creating new avenues for illicit transactions.
Regulatory Requirements
In response to these threats, the Jordanian government has implemented strict regulations requiring financial institutions to implement a robust Know Your Customer (KYC) framework. This includes ongoing monitoring and risk assessment of customers, as well as enhanced due diligence measures for high-risk customers.
Key Components of Perpetual KYC
A key component of this framework is perpetual KYC, which involves continuous monitoring of customer data and updates to ensure that customer profiles remain accurate and up-to-date. This includes:
- Monitoring public records
- Analyzing social media activity
- Identifying potential red flags or changes in a customer’s risk profile
Challenges in Implementing Perpetual KYC in Jordan
Despite the importance of perpetual KYC, implementing it has been hindered by several challenges in Jordan, including:
- Lack of standardization across financial institutions
- Incomplete data capture during the onboarding process
- Limitations in publicly available sources of information
Recommendations for Building a Robust Perpetual KYC Framework
Experts recommend that financial institutions implement a three-step approach to build a robust perpetual KYC framework, including:
- Acquiring accurate identification documents from customers
- Implementing customer due diligence measures such as collecting all available data on the customer and continuous monitoring of relationships
- Scheduling regular reviews based on the customer’s risk profile
Access to Reliable Sources of Information
Financial institutions must also ensure that they have access to reliable and comprehensive sources of information, including:
- Internal watch lists
- External watch lists
- Adverse media reports
This requires significant investment in technology and data analytics capabilities to extract valuable insights from large datasets.
Conclusion
The successful implementation of perpetual KYC in Jordan will require cooperation between the government, financial institutions, and fintech companies. By working together, these stakeholders can create a robust and effective system for combating money laundering and terrorist financing, while also promoting the growth and stability of the country’s financial sector.