End to end KYC. { End-to-end KYC (Know Your Customer) involves the entire process of verifying a customer's identity, assessing their risk factors, and monitoring their activities continuously. This includes Customer Due Diligence which is called CDD, Enhanced Due Diligence - EDD, and sometimes Simplified Due Diligence SDD. 1. Customer Due Diligence (CDD): This is the basic process of verifying a customer's identity and assessing the risk associated with them. It involves collecting essential information such as name, address, date of birth, and verifying it through documents like IDs, utility bills, etc.2. Enhanced Due Diligence (EDD): EDD is 2 conducted for high-risk customers or those with complex account structures. It involves gathering additional information beyond standard CDD to better understand the nature and purpose of the customer's transactions. This can include verifying the source of funds, assessing the customer's business background, and conducting ongoing monitoring. 3. Simplified Due Diligence (SDD): SDD is applied to customers considered to be low risk, such as certain types of accounts or transactions. It involves reducing the level of due diligence required, based on predefined criteria, while still fulfilling basic KYC requirements. Together, these processes form the foundation of an effective AML (Anti-Money Laundering) and CTF (Counter-Terrorist Financing) framework, helping financial institutions mitigate risks associated with money laundering, terrorist financing, and other financial crimes.The Role of an AML/KYC Analyst... Z The role of an AML/KYC analyst in financial services and other AML regulated sectors is crucial for ensuring compliance with anti-money laundering (AML) and know your customer (#KYC) regulations. Lets take a deeper dive to what a roles of an analyst looks like. The role of AML/KYC analysts involve the following tasks: Customer Due Diligence (CDD): ® Gathering necessary documentation and information to establish the legitimacy of customers’ identities. * Conducting ongoing monitoring of customer accounts to ensure compliance with regulatory requirements.Enhanced Due Diligence (EDD): 4 ® Conducting more thorough investigations on high-risk customers, such as politically exposed persons (PEPs) or high-risk businesses. ® Assessing the source of funds and wealth of high-risk customers to understand potential money laundering risks. Transaction Monitoring: * Monitoring customer transactions in real-time or periodically to identify any unusual or suspicious activities. ® Using advanced analytical tools and algorithms to detect patterns indicative of potential money laundering or terrorist financing.Screening Relevant Parties: 5 ® Screening customers, counterparties and other relevant parties against various watchlists, sanctions lists and adverse media sources. ® Identifying any connections to illicit entities or individuals, such as sanctioned individuals, terrorist organisations, or politically exposed persons (PEPs). Collaboration and Reporting: ® Collaborating with internal teams, including compliance, legal, and risk management departments, to share findings and escalate potential risks. * Documenting and maintaining records of investigations, findings, and actions taken to ensure transparency and accountability in compliance efforts. AML/KYC Analysts play a crucial role in maintaining the integrity of the financial system and mitigating financial crime risks.Money Laundering- The illegal process of concealing and converting large amounts of money generated through illicit activities (drug trafficking, gambling, corruption etc) appears to have come from a legitimate source. Anti-Money Laundering - The set of policies & procedures designed to mitigate money laundering. People launder money in order to evade tax, to hide wealth and to increase profits. AML typically follows these process: 1. KYC includes Onboarding, Periodic Reviews and Trigger Events. 2. Transaction Monitoring 3. Suspicious Activity Reporting.Let's understand one by one: 7 1. KYC Definition - It is a process of identifying and verifying clients’ details. Purpose - KYC is required to prevent Money Laundering, Terrorist Financing and Fraud related issues. a)Onboarding Definition - All activities involved in introducing a new customer to products and services offered by a Financial Institution. Purpose - To verify customer’s identity, to intially identify whether the customer posses any risk to the bank. b)Periodic Reviews After successfully onboarding the client, based on the risk they posses they may be scheduled as Low Risk, Medium Risk and High Risk Clients. Low risk clients (once in 3yrs) Medium risk clients (once in 2 yrs) High risk clients (annually)Purpose - To detect and report any suspicious behavior. c) Trigger Events If any client/entity is breaching the stipulated policies and procedures or if any unusual pattern is found in the clients account record, then an event will be triggered. Purpose - To identify if there any underlying activitues which might be a potential threat. 2. Transaction Monitoring It is a process of detecting suspicious activities such as unusual transactions or patterns of transactions, high-risk2. Transaction Monitoring It is a process of detecting suspicious activities such as unusual transactions or patterns of transactions, high-risk customers, or large cash deposits which can be indicative of money laundering or other financial crimes. 3. Suspicious Activity Reporting A SAR is a key document that summarizes suspicious activity for law enforcement agencies. A SAR must be filed in any cash transaction where the customer seems to be trying to avoid BSA reporting requirements by not filing a CTR (Currency Transaction Report). CTR must be filed when a customer deposits, withdraws or exchanges over $10,000.00 in cash in one day. It is also called FINCEN form 104.‘What is PEPS ? Poltcally Exposed Persons (PEPs) are ‘ncviduals who hold or have held prominent public postions and are considered to be at a igher risk for volvement in corruption o& ‘cit nancial actives due to thei sccess to publi powor and influence. PEPSinclude ‘government officials, heads of state, senior polticians, high-ranking miltary officers, and leaders of state-owned enterprises, a8 wo ‘as thelr immediate family members and close Inthe realm of Know Your Customer #K¥C procedures, PPS are subject to enhanced ‘scrutiny and due dligence measures by financial insttutions and other enties to mitigate the risks associated wth conducting ‘business wth them. The Mentification and assessment of PEPs re essential ‘components of #KYC processes, which aim to very the identity of customers, assess thelr risk prof, and prevent nancial crimes ‘such as money laundering and corruption. Financia institutions use various methods to ‘entity PEPs, incising screening customer databases against PEP lists provided by regulatory authors and third-party vendors, Once identified, EPs undergo enhanced #duediigence , whic involves ‘gathering adtional information about their sources of wealth, ancial transactions, and business relationships. This information helps financial insttutions assess the potrtial risks associated with conducting business With PEPs and determine the appropiate level of monitoring and oversight requ. PEP screening in KYC serves several purposes. Fist, t helps financial instutions ‘comply wth regulatory requirements, as ‘many jurscctions mandate the identification and monitoring of PEPS as pat of ‘anti-money laundering #AML and ‘counte-trrariam fnancing #CFT regulations. Second it heps financial Institutions assess the Integy and reputation oftheir customers and identity any potential red lags or suspicious activites that may indicate financial ‘behavior Finely, PEP screening helps ‘mitigate reputational and financial risks for ‘nancial instutions by ensuring that they do ‘ot untingy facitate or become involved In transactions wth ndviduals or entties associated with corruption or financial rime, (Overall, PEP screenings a crucial ‘component of #KYC processes that helps financial institutions manage sks, comply vith regulations and safeguard the integrity ofthe financial system. By Implementing robust PEP identification and #auedigence ‘measures, financial institutions can enhance ‘ther abit to detect ana prevent financial ‘times and maintain the trust and confidence of ther customers and stakeholders