Financial institutions have to comply with various AML, CFT, and KYC regulations in customer onboarding processes. According to Anti Money Laundering and Know Your Customer (KYC) regulations, financial institutions must apply a risk assessment to their new customers. To comply with regulations, companies must perform an AML check and a KYC check. The purpose of these controls is to enable companies to identify the potential risks of their customers and apply control mechanisms appropriate to the customers' risk levels.
The Anti-Money Laundering Regulations include various sanctions against money laundering and terrorist financing in banking. Banks must take multiple measures in cases such as detecting dangerous payments and risky customer activities. If these regulations are not followed and the necessary steps are not taken, banking institutions may be subject to penal sanctions.
There are regulators with local and global authority established to ensure financial systems' stability and prevent financial crimes. Various financial crimes are committed every year in the world. Global money laundering transactions are estimated at %5 of the global GDP. Each year, a global bribe of $ 1 trillion is given. It is estimated that the amount of corruption in the world is $ 2.6 trillion. Also, terrorist funding increases the number of terrorist activities in the world. Therefore, AML regulators have imposed some obligations to companies on customer onboarding processes to prevent financial crimes.
Most of these financial crimes occur through financial systems. Gaps in financial systems and financial institutions' failure to take various measures cause financial crimes to occur. Also, the stability of the economy is damaged as a result of financial crimes. Money laundering is the process of showing the source of illegal income as legal income by hiding. Regulators aim to prevent financial crimes by regulations and laws. Regulations require you first to KYC check your customers during the onboarding process and then follow their financial transactions. Companies that meet this Know Your Customer (KYC) requirement will ensure compliance. Regulators fine financial institutions if they do not meet their Know Your Clients requirements.
Companies have to implement the KYC guidelines of customer onboarding processes. The companies' compliance officers fulfill and conduct the liabilities of the companies in the compliance processes. Customer identification is the most critical process of KYC. Then, the accuracy of customer information will check. If the customer's data is not verified, the customer's other information may be incorrect. In this case, all controls applied in all AML, KYC, and CDD processes will be non-functional. Besides, this error in the control process may result in being punished by the regulators and losing its reputation for the company.
Then, the company starts to investigate the customer's history. The customer's previous financial transactions are reviewed. Any suspicious transactions of the past period are investigated. If there is a criminal transaction in the customer's past transactions, the company will want to take precautions against this. No firm would want the financial institution to be a client of a guilty person. These clients are dangerous for companies.
After this stage, companies have to apply a risk assessment. The risk assessment processes applied are generally called Customer Due Diligence procedures. Customer Due Diligence procedures include sanction, PEP, and adverse media screening. The persons in this data are high-risk customer profiles for companies. Companies should determine customer risks during customer account opening and follow a process accordingly. Considerations when determining the Customer Risk Level:
If identified as a high-risk customer, the Enhanced Due Diligence process is applied to the customer. If there is no suspicious situation in the controls made up to this stage, the customer's account is opened.
Financial institutions implementing these processes are considered to have fulfilled AML and Know Your Customer laws. Also, companies should continue to carry out these checks at regular intervals to their customers. According to AML obligations, companies are also required to control the financial transactions of their customers.
The Merchant Onboarding Process of adding the different merchants in a payment gateway policy so that merchant can access their API along with the virtual terminal and test the payment gateway is called merchant Onboarding.
Banks, money transfer companies, FinTech, payment companies, accounting firms, and all companies providing financial services have to comply with KYC solutions and AML regulations. For financial companies, the guidelines are endless. Financial service providers, such as the bank, should take measures to ensure that their client account profiles are accurate and risk-based. In the past, the use of manual methods to combat financial crimes by companies has been complicated. Today, financial companies use AML Screening Service, such as Sanction Scanner, to meet regulatory requirements.
Sanction Scanner is the Anti-Money Laundering Compliance Program in international standards. Sanction Scanner enables your business to comply with AML and KYC laws with Remittance & Payment Screening, Customer & Merchant Onboarding/Monitoring Process, and Real-Time Transaction Monitoring features. Sanction Scanner helps financial firms comply with regulations. With Sanction Scanner, you can easily manage your customer onboarding, transaction screening, and transaction monitoring processes. Our database consists of over 1000 Sanctions, regulatory and law enforcement, and other official global and local sanction and pep lists, including those issued by the USA, UK, UN, and other global major and minor government departments. Sanction Scanner never stores customer data and customer information. Customer queries made by companies are fully GDPR compliant. With Sanction Scanner, you can fight financial crime. Let's! For detailed information, contact us or request a demo.