Preventing Money Laundering and Financial Crimes are primitive tasks of a bank, lending firms or financial institutions. Grimness in KYC or Know Your Customer compliance program from the government institutions are only for customers own protection. Banks question your detail information to combat against money laundering and terrorist funding and it is the law.
Most of the times banks are found engaged in money laundering unknowingly but seldom they found engaged intentionally. Compliance is a pretty challenging task to complete as it requires huge cost for a team of experts and the transformation of traditional banking towards FinTech. But after spending on them, banks and financial institutions are producing conducive results. KYC and AML Compliance programs are not optional, not implementing them costs you tremendous penalties. KYC is a crucial tool and an integral part of a bank’s risk to monitor his clients and counterparties even for retail or corporate purpose KYC standards are not negotiable.
Every country is enforcing financial institutions and banks to implement KYC and AML Compliance program following the guidelines of Financial Action Task Force (FATF) to combat against Money Laundering (AML) and Combating Financing of Terrorism (CFT). FATF enforce countries to follow the minimum guidelines provided by the Financial Action Task Force for AML and CFT.
Legislators of many countries are including these guidelines in legislation and authorized financial crime controllers are implementing it ironically. Fines have been imposed on many banks due to not fulfilling the requirement of KYC and AML Compliance program by FATF. By implementation of KYC and AML Software for banks, the aim is to aware financial institutions and banks from the pertinent issues of customers.
Obstacles faced by banks
Banks are confronting challenges in implementing FATF regulations. Several of them triumphantly implemented the primary steps of onboarding and documentation. But due to new money Laundering techniques, FATF is realising new regulations and urging countries to satisfy requirements. It costs the bank to implement new regulations because they have to take further hard decisions and integration of technical equipment is another task. They have to update the database on a regular basis that is another challenging task itself. Changing in ongoing monitoring i.e. extracting or adding a new name is itself challenging for an enterprise and it requires a specialised team to perform this operation. But all these are facilitating the banking process and helping them to wipe out illicit transactions and money laundering activities under their channel. This will also build the trust of customers of financial industries and it will also conserve them from hefty penalties by authorised financial departments. Banks are suffering from many challenges for compliance program because they have limited resources and measure of regulations by FATF is increasing day by day. It requires significant financing for data expertise within Compliance with the cooperation of technology.
Why the KYC and AML Compliance program is crucial
The objective of KYC for banks is to encourage them in better understanding of their customers, their behaviour and their transaction and AML helps the bank to stop money laundering. KYC is developed globally to combat crimes including Money laundering, Identity theft, and terrorist financing. KYC and AML compliance program is a great measure to prevent corruption. It is crucial for banks to perform KYC and AML checks for many reasons some of them are enlisted below.
1- It is crucial to identify who the client is to stop dealing with any fraudster and to prevent him perform any transactions under your channel. It could impose fines on your industry.
2- To prevent money laundering by managing high risked or low risked profiles of customers.
3- Terrorist financing is inexcusable in any case. Therefore it is very crucial for banks to detect and deter any terrorist financing.
4- According to the law of banking obligations, it is for banks to identify their customers.
5- According to the business point of view, it is the core need for banks to deeply understand their customers and find their needs. With the help of KYC, Banks can perform DOB, Name and address verification checks with much of other data, financial industries can understand their client more precisely and can offer them products according to their need to increase sales and to obtain more profit. KYC and AML Compliance program is beneficial for both banks and customers.