Regulators have increased their focus on modernizing and enforcing anti-money laundering and terrorism financing regulations. As part of these efforts, the US’ Financial Crimes Enforcement Network proposed Know Your Customer requirements.
While the proposal outlines baseline requirements, complete criteria for customer risk assessments are largely left open for institutions to interpret. Considering the consequences of non-compliance, institutions should begin their implementation efforts as soon as possible based on industry best practices. This is particularly important for global institutions that will need to reconcile differences across jurisdictions.
This Financial crimes observer provides our view of (a) industry best practices for completing customer risk assessments, (b) factors to consider when relying on customer information provided by third parties, and (c) what institutions should be doing now.