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Principles of Knowing Your Customer

?What are the general principles of KYC (Knowing your customer)?
?Who should be verified, and what is meant by low risk and high risk when it comes to customers and products?

Discuss at least three low risk and three high risk characteristics or types of each.

?When should it be done and how? Include the different data sources you would use.
?How and why do you check the source of funds?
?When should the red flags go up on identity, source of funds?
?What sort of records should be kept?
?Give examples of what to do if the following happens:
Your client lives in a foreign country. They don't have an on-ground address. They are a PEP.
?Would you do anything differently if you worked for an insurance company?

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General principles

KYC principles make it a requirement for banks and other companies to know the identity of their clients, the source of monies being transferred into an account and the type of business a company will undertake. The supply of this information is a legal requirement and clients must provide full and frank information about themselves, their business dealings and their future plans (

In relation to this, the Capital Markets and Financial Institutions Supervisory Agency has issued a regulation regarding application of the 'know your customer' principle by financial services providers in the capital markets sector. The regulation was issued under Decree KEP-476/BL/2009.

Through the information that will be supplied by the clients, the company could determine the level of risk in the financial transactions that will be made with them. The information could indicate some manifestations of possible violations of the Money Laundering Act.

Under the 'know your customer' principle, financial services providers in the capital markets sector must: (

1. establish a working unit or assign an officer of a rank below director to be in charge of application of the 'know your customer' principle;
2. stipulate written policies and procedures concerning: a)customers' acceptance, identification and verification; b) the monitor of customer accounts ...

Solution Summary

The principles of knowing your customer is determined. The expert discusses at least three low risk and three high risk characteristics or types of each.