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Know Your Client and Anti-money laundering policies - ConfidusSolutions - 06-21-2022
Know Your Client, also known as KYC, refers to numerous due diligence activities performed not only by financial institutions but also by other regulated entities to get all relevant information about their clients before and during doing business with them. Each financial and business entity is responsible for adopting and implementing various KYC procedures and regulations.
Know-Your-Client policies typically include procedures such as:
Collecting and analyzing an individual's identity information and identifying the true beneficiary of the business and business accounts
Name matching with party lists (search for politically exposed persons or PEPs)
Determining a customer's likelihood of committing money laundering, terrorist financing, identity theft or other criminal offenses
Creating expectations profiles based on a customer's transaction behavior and monitoring deviations from this profile
Anti-Money Laundering, also known as AML, is a set of laws, regulations and other procedures designed to discourage the practice of generating revenue from illegal activities. Typically, money launderers hide the true source of their income through a series of steps that make it appear as if money was legitimately earned from illegal activities. Anti-money laundering policies aim to help institutions identify and investigate possible cases.
Globalization and the global information exchange system
KYC and AML policies aim to provide solutions to eliminate the numerous risks that arise from the fact that financial institutions do not know their customers. On the other hand, the same guidelines also tend to conflict with an individual's general expectations of confidentiality and privacy.
With the rapid advance of globalization over the past few decades, security concerns have become a top priority, not only for national regulators but for the international community in general. In response to growing concerns about money laundering, an intergovernmental organization called the Financial Action Task Force on Money Laundering (FATF) was formed during the G7 summit in Paris in 1989 and issued recommendations on money laundering and terrorist financing shortly thereafter. All recommendations are to be implemented at the national level through laws and other legally binding measures. In addition to the know-your-client and anti-money laundering procedures described above, the FATF Recommendations require states to cooperate internationally and share relevant information in investigations.
A new international standard called AEOI, or Automatic Exchange of Information, will come into effect in participating countries to ensure tax authorities share data about taxpayers' bank accounts. The main goal of the AEOI is to make tax evasion impossible. The AEOI requires banks to report bank and custody account information to the domestic tax authorities. This information is then exchanged with the tax authorities in the AEOI partner countries.
Possible solutions to protect confidentiality
Some jurisdictions consider disclosing an account holder's name a criminal offense. The privacy of a bank's customers is protected by law and is considered comparable to the confidentiality between doctor and patient or lawyer and client. Although privacy is considered a fundamental principle and is strongly protected in these jurisdictions, law enforcement may be given access to the relevant information in the context of a criminal investigation.
However, if there is no criminal charge, offshore banks offer the highest level of confidentiality and security. Offshore banking jurisdictions are designed to protect assets from domestic litigation and other civil matters such as contested probate or divorce. An even higher level of confidentiality and anonymity is available through other vehicles for ownership of assets – for example, international corporations and offshore trusts.
Another way to increase your privacy is to use a nominee so that your name does not appear as the owner of your company in the commercial register (nominee services). However, any bank that requires disclosure of the company's beneficiaries would still see your name on the list.
https://www.confiduss.com/en/services/corporate/legal/aml-policy/