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There is a better way to identify the threats that the customer by implementing risk based approach by putting place criteria to identify these risks:
Customer Type
Industry
Country
Product and Services
You can attribute the risk for each criteria from low to high,1 being the lowest and5 highest. providing risk rating to each component can be given based on risk appetite of the bank.
For example the criteria of listing country risk is can be given considering the sanctions regimes, transparency, deficiency in AML and CFT practice and corruption or tax haven status.
Industry is based on the risk of business activities designated by FATF or regulators of the country, EU, OFAC and other advisory bodies.
Product risk can be attributed to the product that can be vulnerable to Money laundering and terrorist financing such as call accounts, Credit Card, Trade finance, Investment....
Customer type weather the customer is individual or entity, PEP, free-zone, offshore companies....
Country risk is mainly in relation to sanctions, corruption, Tax haven narcotics and AML deficiencies.
Hi,
KYC is a mechanism to profile; primarily the negative aspects of a customer or prospective customer. The effectiveness of meeting its intended control objectives depends on how the KYC is designed. in other words, if the KYC is not designed properly, it will certainly not help the banker.
Muhammad Shareef
KYC is a tool you use to know your customer in terms of source of funds, fund generating activities, whereabouts, business associates, suppliers and clientele etc. among other things.If properly done, you know what the transaction patterns and thresholds are on an average down to each individual transaction. Due to a properly documented KYC, it becomes a lot easier to to pin-point any unusual transactions that may become a threat to you as a banker or to your bank.
KYC/CDD is known as the best security in term of financing. if proper instructions were followed it could prevent money laundering,
it helps the banker to understand the risk of accepting the customers profile in to their banking system
