Financial Crime World

Portugal’s New Approach to Customer Due Diligence: Perpetual KYC

Portugal, a financial hub in the European Union (EU) and member of the Financial Action Task Force (FATF), is enhancing its Know Your Customer (KYC) procedures to combat financial crime through a new approach: Perpetual KYC. This business brief provides an overview of perpetual KYC and its implications for businesses operating in Portugal.

Drivers for the Change

Regulatory requirements and international efforts to prevent financial crime are the primary drivers for Portugal’s new approach to customer due diligence. Portugal must comply with the global standards for anti-money laundering (AML) and combating the financing of terrorism (CFT) as a member of the EU and FATF. The European Union’s Fifth Anti-Money Laundering Directive (5AMLD) and FATF recommendations introduced new regulations and guidelines to strengthen KYC procedures.

What is Perpetual KYC?

Perpetual KYC, also known as ongoing or continuous KYC, is the process of regular and recurring customer due diligence, updating customer information continuously to maintain accurate knowledge of the customer’s circumstances 1. Traditional KYC procedures are performed only once or periodically, but with the increase in financial crime and regulatory expectations, perpetual KYC has become necessary to effectively mitigate risks.

Challenges and Solutions

Implementing perpetual KYC poses challenges for businesses due to the significant resources and robust technology infrastructure required for continuous monitoring of customer information. This includes real-time updates, regular risk assessments, and ongoing monitoring for changes in customer behavior or circumstances that indicate financial crime or money laundering activities 2.

Several solutions have emerged to help businesses manage perpetual KYC effectively:

  1. Automated customer due diligence systems: These systems employ artificial intelligence and machine learning technologies for real-time monitoring and risk assessments, reducing manual resources’ burden and increasing accuracy 3.
  2. Compliance as a service (CaaS): Outsourcing KYC and AML operations to third-party compliance providers allows businesses to focus on core activities while maintaining compliance 4.
  3. Integration of KYC solutions with CRM systems: Seamless integration simplifies the process of updating and maintaining customer information, improving operational efficiency and reducing errors or inconsistencies 5.

Conclusion

Perpetual KYC is essential for the financial services industry in the fight against financial crime. Portugal’s adoption of this approach demonstrates its commitment to upholding global regulatory standards and maintaining a strong and reputable financial sector 6. Embracing solutions such as automated systems, CaaS, and CRM integration can help businesses effectively manage perpetual KYC requirements while minimizing resource burden 7.

[1]: What is Perpetual (Continuous) KYC? [2]: Challenges of Implementing Perpetual KYC [3]: Automated Customer Due Diligence Systems for Perpetual KYC [4]: Compliance as a Service (CaaS) for Perpetual KYC [5]: Integration of KYC Solutions with Customer Relationship Management (CRM) Systems [6]: The Importance of Perpetual KYC for Portugal’s Financial Sector [7]: Leveraging Solutions for Effective Perpetual KYC Management

[#footnote1]: What is Perpetual (Continuous) KYC? According to PwC, perpetual KYC, also known as continuous or ongoing KYC, is a process of regular, recurring customer due diligence to maintain accurate and up-to-date customer information continuously [1].

[#footnote2]: Challenges of Implementing Perpetual KYC Implementing perpetual KYC poses several challenges for businesses, including the significant resources and technology infrastructure required to monitor customer information continuously, performing real-time updates, and ongoing risk assessments [2].

[#footnote3]: Automated Customer Due Diligence Systems for Perpetual KYC Automated customer due diligence systems, which employ artificial intelligence and machine learning technologies, can help overcome challenges in implementing perpetual KYC by reducing the burden on manual resources and increasing accuracy [3].

[#footnote4]: Compliance as a Service (CaaS) for Perpetual KYC Compliance as a service (CaaS) providers, who specialize in maintaining up-to-date customer information, can help businesses effectively manage perpetual KYC requirements while enabling them to focus on core activities [4].

[#footnote5]: Integration of KYC Solutions with Customer Relationship Management (CRM) Systems Integrating KYC solutions with CRM systems allows for a seamless process of updating and maintaining customer information, improving operational efficiency and reducing errors or inconsistencies [5].

[#footnote6]: The Importance of Perpetual KYC for Portugal’s Financial SectorPortugal’s adoption of perpetual KYC demonstrates its commitment to complying with global regulatory standards and maintaining a strong and reputable financial sector [6].

[#footnote7]: Leveraging Solutions for Effective Perpetual KYC Management Leveraging solutions such as automated systems, CaaS, and CRM integration can help businesses effectively manage perpetual KYC requirements while minimizing the burden on resources [7].