What is KYC and its stages?

Know Your Customer (KYC) is part of the due diligence process that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. Typically, a KYC policy is requirement to comply with anti-money laundering regulations and the Code of Diligence of the Swiss Bankers’ Association. Know your customer policies have becoming increasingly important globally to prevent identity theft, fraud, money laundering and terrorist financing. In a simple form these rules may equate to answering twelve questions, but this is the tip of the iceberg and regulators now expect much more. KYC should not be thought of as a format to be filled - it is a process to be undergone from the start of a customer relationship to the end.

One aspect of KYC checking is to verify that a customer is not on any list of known fraudsters, terrorists or money launderers, using external sources such as World-Check. This database contains thousands of entries and is updated regularly. PB Compliance also has access to a number of subscription databases for more extensive KYC checks.

Beyond name matching, a key aspect of KYC controls is to monitor transactions of a customer against their recorded profile, history on the customers account(s) and with peers. Therefore, a completely filled out KYC profile will support the relationship manager to explain unusual transaction in the course of AML transaction monitoring.

The client profile contains the relevant information on the personal and economic environment of the client or beneficial owner respectively, as well as that of the power of attorney holder. Some of the regulatory required information is source of wealth, origin of funds, business activities and family situation. The KYC profile shall be established in a way that a third party reader (such as an auditor or Compliance Officer) gets a clear and full picture of the client, without having to go back to the relationship manager.

Basic principles 

• • A client profile is to be compiled for each relationship where the contractual partner maintains several accounts with the Bank.
  • The client profile must contain details on each beneficial owner in cases where the client is not the sole beneficial owner of the assets deposited.
  • If there is more than one account holder in a relationship, the client profile must contain details for each holder.
  • The information recorded in the client profile is to be compiled in such a manner that it is understandable for informed third parties, comprehensible and plausible.
  • For relationships with domiciliary companies, the information in the client profile may be limited to the details of the beneficial owner where this is an individual
  • If the beneficial owner of the domiciliary company is a legal entity a separate client profile must be established there for.
  • Private Banking Compliance should be contacted in cases where the client refuses to provide the information required for the client profile.
  • Where the power of attorney holder is a Politically Exposed Person (as defined according to the definition in Policy D-1026 “Client Acceptance Policy”) this must be noted on the client profile with the relevant details. In addition, the relationship between the power of attorney holder and the account holder/beneficial owner must be recorded.
  • The information on each relationship must be recorded according to the principles given above for clients managed by external assets.

Responsibilities of Compliance Special Desk KYC

• • Defines rules re: implementation of KYC standarts
  • Review of KYC information recorded in Windekis under Client Profile
  • Initiates and coordinates global searches (through Client Documentation Services)
  • Regular random checks in order to review the completeness and plausibility of the client profiles recorded in the electronic system