Preventing Financial Crime - the Importance of Know Your Business and Know Your Customer

by Mohit J. White Hat Link Building Services

The state of global financial and economic health is a fragile thing.

Financial crimes can wreak havoc on these fragile systems and affect us all.

That's why it is important to know your business and know your customer. 

Who is affected?

Financial crime can hinder or destroy the economy on a worldwide level.

Crimes like money laundering and tax evasion can either replace legitimate funds or decrease the amount of funds available. Other crimes like terrorism financing or drug trafficking can lead to violence and the decimation of the economy.

Financial crimes do not always start at a bank or lender.  Money laundering and other crimes can be initiated or funded, in secret, through any business that deals with the trading of any type of currency. This can include utilizing fake money — cash, check, cards, or other electronic funds.

Another major type of crime that starts with small businesses is identity theft.

This is committed by a person opening and using bank accounts, credit cards, and loans in another person’s name. It can also be done by doing business, or committing crimes, saying they are someone else — whether they have a fake ID or not.

What can we do?

The way to catch these criminals in the act or before they can commit crimes is through a series of checks and regulations laid out by the intergovernmental organization, the Financial Action Task Force (FATF).

Among the regulations and standards to prevent financial crime are know your business (KYB) and know your customer (KYC).

KYC, though typically utilized by banks and financial institutions, should be used by anyone who’s business relies on the exchange of currency.

Know your customer is the process of collecting information for an individual customer.

Know your business is not too different from KYC. The difference is who KYB identifies — companies, businesses, and suppliers.

If we all band together worldwide and perform these series of checks and standards, there will be less chance for a criminal to commit a financial crime.

How to KYB or KYC

 To perform the due diligence process of KYC and KYB, you have to collect, analyze, and investigate pertinent identifying information.

For KYC, it could be as simple as collecting their government ID, verifying it truly is them, and that all information given matches.

When dealing with banks and financial institutions, it becomes more in depth. A financial institution collects government ID and determines who the true beneficial owners of the transactions are.

To perform the standards for KYC a financial institution collects information like

●        Personal identification and addresses for all beneficial owners

●        Business name and address/s

●        Registration documents

●        Any license information

This information collected then gets compared to national and international records to establish if the information is correct and determine the risks of financial crime.

The economy and financial system are fragile and vital parts of our daily lives.

If we all do our due diligence, we can spot the risks of potential crimes and stop them before they ever affect the global economy.

One of the first steps in bringing safety to our world’s finances is to know your business and know your customer.

 

 

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Created on Dec 15th 2022 01:13. Viewed 100 times.

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