What are the benefits of KYC requirements for banks, and how do they help prevent money laundering?
Banking
Asked by Question Bot12/Aug/20151 answer
1 Answer
F
Faisal Khan
Answered 12/Aug/2015
Cash is strictly an anonymous medium of exchange, however, this changes when cash is deposited into a bank and then this electronic money is moved.
The whole idea behind Money Laundering is to move money in any which way you can so that bad money (money earned from illegal or undeclared means) is turned into legal (or 'white') money.
There are many ways of doing this, and equally many ways of getting caught.
When AML software is used for profiling people and detecting patterns or finding linkages between transaction, identity is one of the most important aspect. Hence Knowing Your Customer is extremely crucial.
Questions like these mentioned above, along with 100s of many more, help detect and then mitigate money laundering efforts.
You can detect and stop money laundering, but then, who is the person who is doing this is what the LEAs are most interested in.
Banks place limits on everything based on the information they have on file about a client. Sometimes basic KYC information collected is not enough, and hence more information may be required.
Criminals will always try to hack the system by testing it with various scenarios and KYC plays a central role in this. Thus, KYC is an extremely crucial element in the equation of anti-money laundering.
The whole idea behind Money Laundering is to move money in any which way you can so that bad money (money earned from illegal or undeclared means) is turned into legal (or 'white') money.
There are many ways of doing this, and equally many ways of getting caught.
When AML software is used for profiling people and detecting patterns or finding linkages between transaction, identity is one of the most important aspect. Hence Knowing Your Customer is extremely crucial.
- Is the Customer genuine?
- Has the Customer's identity been stolen?
- Does the Customer know (willingly) that their ID has been stolen and is being used for money laundering?
- Is the Customer a victim in money laundering?
- Is the Customer a willful player in laundering money?
- Is the Customer oblivious to the transactions that are involved in laundering of money?
- Do the Customer credentials match with records elsewhere?
- How confident is the on-boarding FI/Bank on the KYC of the Customer?
- How confident is the off-boarding FI/Bank on the KYC of the Customer that initiated the transaction?
- What are the KYC of the people(s) who transacted with the suspected KYC customer?
Questions like these mentioned above, along with 100s of many more, help detect and then mitigate money laundering efforts.
You can detect and stop money laundering, but then, who is the person who is doing this is what the LEAs are most interested in.
Banks place limits on everything based on the information they have on file about a client. Sometimes basic KYC information collected is not enough, and hence more information may be required.
Criminals will always try to hack the system by testing it with various scenarios and KYC plays a central role in this. Thus, KYC is an extremely crucial element in the equation of anti-money laundering.