Know Your Customer - Risk Rating

Know Your Customer (KYC) is the practice carried out by companies to verify the identity of their clients in compliance with legal requirements and current laws and regulations. Know Your Customer is the due diligence that Banks must perform to identify their clients and ascertain relevant information pertinent to doing business with them.

The KYC risk rating is a calculation of risk. Making this calculation ensures that organizations do not do business with a person involved in another financial crime, such as money laundering or terrorist financing.

Types Of KYC Risk Rating

Low Risk (SDD- Standard Due Diligence): Standard due diligence are generally situations where there is a potential risk, but it is unlikely that these risks will be realized. A significant amount of your customers will typically require a standard due diligence program. It should be clear why the customer is paying for the service. The business should ensure that the transaction is not associated with money laundering and terrorist financing.

Medium Risk (CDD - Customer due diligence): Customer Due Diligence is required because businesses can better identify suspicious transactions if they know their customers and understand the reasoning behind the instructions they give.

CDD is the key part of anti-money laundering requirements. Financial Institutions are required to customer screening to avoid financial crime risks. It is essential to apply the CDD process in new business relationships. After checking the customer, you should start the business relationship. This eliminates potential risks. In addition, CDD checks should be performed in case of suspicious transactions.

High Risk (EDD- Enhanced Due Diligence): There are types of high-risk customer types in banking. A risk-based approach to customer due diligence will identify situations that can present a higher risk of money laundering or terrorist financing. This higher level of due diligence is required to decrease the increased risk. By using Enhanced Due Diligence, the business relationship with a risky customer starts only once there is approval from the senior management.

Ongoing Monitoring

High-risk customers are a threat to businesses in many ways. Companies determine the risk level of customers in the process of customer onboarding. High-risk customers must be checked regularly due to the threat of crime and AML policy. Ongoing monitoring is the AML control process applied to check high-risk customers.

It is essential to have up-to-date data when checking your customers. Sanction Scanner always provides global comprehensive and real-time data. In Sanction Scanner's database, global lists are affecting most countries published by the USA, the UK, and the United Nations and various lists of local minor governments and regulators. Sanction Scanner enriches and configures the data. Businesses can create reports that are easy to understand and GDPR compliant. Moreover, businesses can carry out Customer Due Diligence and Enhanced Due Diligence measures in accordance with all obligations with our AML Screening and Monitoring tool. Do not hesitate to talk to us or request a demo for more detailed information.