The Requirement to Record-Keeping of Customer Identity and Transactions

Keeping records of customer identity and transactions is an essential component of Anti-Money Laundering (AML) regulations. Companies that are obliged to comply with the regulations are obliged to keep money laundering-deterrence records and controls.


What is The Record-Keeping?

Firms are required to keep records of customer identity and transactions as proof of work performed to comply with local regulatory and legal obligations. In suspicious cases, the records are forwarded to law enforcement, and law enforcement can conduct an investigation over the records. These records can be used as evidence by companies if law enforcement conducts an investigation on suspicious activities. Therefore, in the records kept, companies should keep adequate records appropriate to the business's complexity, scale, and nature and make them accessible as required by local regulations. At the same time, companies should keep such records up-to-date, so they should also manage their communication with their customers well in order to update their information.


What Records Should Companies Keep?

The records that companies should keep differ depending on the regulation they are subject to, their jurisdiction, etc. But most fundamentally, the purpose of reporting records is to ensure that the firm can provide details of the identification and tracking audit trail should the firm's client be investigated. The types of records that need to be collected can be summarized as follows;

  • Defining customer information
  • Transactions
  • MLRO annual reports;
  • External and Internal suspicion reports;
  • investigation records;
  • Information that is not processed;
  • Actions are taken as a result of agency requests;
  • Training and compliance monitoring;
  • Information about the effectiveness of training.

We can detail some of these record types as follows.


Defining Customer Information

Often a firm is required to keep a copy of references and other evidence of a customer's identity obtained during the customer due diligence process. Copies of identity documents should also usually be kept. Additional information obtained as a result of enhanced due diligence should also be retained for continuous monitoring. In addition, it is very important to keep reports of the results for customers scanned in lists such as PEP, Sanction, and Watchlist and to present them to the relevant institution when necessary.


Transactions;

AML regulations require that transactions made throughout the life of the business relationship be kept as part of the firm's records. Transaction records can be as follows; credit and debit notes, checks, and correspondence. Firms need to ensure that a satisfactory audit trail is maintained in a form that can be compiled and a financial profile created for any suspicious accounts or customers.


According to the regulations, the time required to keep such records is up to five years from the date of completion of the transaction. However, suppose the transaction concerns an asset against which a claim may exist for more than five years. In that case, the firm may be required to apply a longer retention period than is specifically required for domestic money laundering.


Internal and External Suspicion Reports

Firms normally require to keep and maintain records of all actions taken under internal and external reporting requirements. Firms should also keep records of times the appointed compliance officer has reviewed, for example, MLRO potential money laundering-related information or other material but has not filed a report with the appropriate authority.


How to Keep Customer Identity and Transactions Records?

The way of keeping the reports depends on the local and global regulatory records and retention rules. The volume and density of the records determine the way of keeping the records. However, the general options to consider for recording information are:

  • Through the original documentation;
  • In computerized or electronic form.
  • through photocopies of original documents;
  • Scanned form;
  • On the microfiche;

Record keeping periods and rules are not normally affected by the format in which records are kept. However, records should be accessible and easily accessible while rationalizing computer systems and physical storage arrangements for firms involved in mergers and acquisitions, as well as money laundering obligations. Usually, there is no set place by regulations as to where records should be kept, only the requirement that they can be retrieved without undue delay.


In addition, companies have a responsibility to ensure that records held outside their home country meet the same record-keeping requirements. After the records are requested by the relevant law enforcement authorities and are subject to ongoing investigations, the records should be retained until the firm is notified by the relevant authority that the case has been closed. However, suppose a firm has not been notified of an ongoing investigation within five years of making a statement. In that case, records can often be destroyed in accordance with normal local jurisdiction record-keeping procedures.


Sanction Scanner has solutions that facilitate AML compliance. With Sanction Scanner's AML Name Screening solution, companies create reports of your query results with structured data after scanning their customers on lists such as PEP, Sanction, Watchlist. All up-to-date information about the scanned person can be viewed in the report. In addition, during the audit process of companies, old queries can be viewed, reviewed at any time, and these reports can be presented to the regulators as evidence.


Likewise, thanks to the Transaction Monitoring software, the compliance team receives an immediate alert for any suspicious transaction while scanning customer transactions. After the compliance team examines these alarms, they can report them and show them to the relevant institutions as evidence if a suspicious transaction is detected. Reach us today to discover Sanction Scanner's enhanced AML Software.

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