If you are familiar with the financial industry, you have likely heard the phrase “know your customer”, which is often referred to as KYC. KYC is an important practice in business and finance, as it allows institutions to ensure that their clients are not involved in money-related crimes. KYC remediation is pivotal for preventing your company from getting involved in corruption, the terrorist financing, and money laundering.
There are several different ways that institutions and companies can go about KYC remediation. One of the most popular and common KYC remediation tactics is to screen, verify, and identify customers. There are many compliance products that a company can use to accomplish this efficiently, and it may also be done manually. The main goal should be to determine which clients are most at risk of executing financial crimes and which ones do not need to be monitored so closely.
The purpose of KYC remediation is to verify the identity of the person you are doing business with. If a company does not have sufficient information about a client, that client might be able to launder money or partake in other corrupt activities without any red flags being raised. This could get the company in serious legal trouble down the line, possibly leading to fines and even jail time for employees.
Financial institutions are strictly regulated in regards to financial crime. Because they play such a central role in the financial sector, they are given the responsibility of reporting suspicious activity and helping to ensure that money laundering does not occur. KYC remediation is necessary for institutions to properly meet this responsibility.
Once a company has compiled enough information about a client, they can then go through the necessary remediation process. The remediation process is where they clear up any contradictory data, organize the information they have acquired, and determine what else is left for them to find out about the client.
As soon as the KYC remediation has been successfully completed, the company can then determine the risk that the client poses and continue to add to their portfolio. This is a very important step, as it helps to decide whether the company or financial institution must report the client to authorities for suspicious activity or potential corruption.
Although many individuals now realise the importance of KYC, some have still not started to understand why KYC remediation is so vital. You do not only need to know your customer; you also need to have organized and straightforward information and risk assessments about them. KYC remediation is key both to achieving this and to making sure that you are following all of the laws and regulations you need to be. Being fully aware of what is going on with your clients is the first step towards being protected against backlash from illegal transactions.