Financial Crime World

Ghana Banks Urged to Strengthen Know Your Customer Policies

The Banking Supervision Department (BSD) has issued a stern warning to commercial banks in Ghana to strengthen their Know Your Customer (KYC) policies and procedures to prevent being used by criminal elements.

Warning Issued

According to the BSD, most banks in the country have failed to develop comprehensive KYC procedures, thereby putting them at risk of being used for illicit activities. The department has therefore issued a proposed format that represents the minimum requirements for banks to establish clear customer acceptance policies and procedures.

Proposed Format

The proposed format includes guidelines on:

  • Types of customers that are likely to pose a higher than average risk to the bank
  • Managerial review of such prospective customers where appropriate
  • Strict ‘know-your-customer’ rules in place to promote high ethical and professional standards in the financial sector

Consistency with International Standards

The development of these guidelines is consistent with Principle 15 of the Basel Core Principles Methodology, which requires banking supervisors to ensure that banks have adequate policies, practices and procedures in place to prevent being used by criminal elements. The Basel Committee on Banking Supervision’s paper on Customer Due Diligence for Banks, published in October 2001, also emphasized the importance of KYC policies and procedures.

Impact on the Financial Sector

The move is expected to enhance transparency and accountability in the banking sector, thereby reducing the risks associated with money laundering and terrorist financing. It also underscores the importance of effective risk management practices in the financial sector to prevent the misuse of banking services by criminal elements.

Historical Context

In a bid to strengthen its regulatory framework, the Bank of Ghana has issued its own currency in the form of Ghana pounds, shillings and pence since Ghana gained independence. The bank took over the issue of currency notes and coins from the West African Currency Board (WACB) on July 14, 1958.

Conclusion

The strengthening of KYC policies is a crucial step towards ensuring that banks in Ghana are adequately equipped to identify and mitigate the risks associated with money laundering and terrorist financing. It is essential for banks to comply with these guidelines to promote high ethical and professional standards in the financial sector.