Abiding by a host of regulatory requirements is an additional responsibility for businesses, many of which already face immense pressure to increase margins in tough economic times and improve customer satisfaction in competitive environments.
Complying with the Know your Customer (KYC) principle within the Financial Intelligence Centre Act, 2001 (FICA) means that organisations are required to vet the identities of their customers/clients before or during the time they do business.
This is required to ensure that clients are not involved in criminal and unscrupulous activities, which could significantly affect all that are associated with them.
However, the good thing about compliance is that acquiescent organisations are healthier and are far safer against the risks of penalties, reputational damage and financial loss.
Casting aside regulatory pressures, there are several motivations for businesses to property vet their customers, according to Rudi Kruger, General Manager of Data Services at LexisNexis South Africa. “I would say protecting against fraud, money laundering and other criminal activities is motivation enough for companies to value the importance of KYC guidelines. And second to this motivation would be regulatory compliance,” he said.
“The universally accepted best practices in KYC due diligence include the following steps:
- Establish your customer’s identity and verify their documentation
- Next is to understand the nature of the customer’s activities
- Then, screen against warning lists or blacklists and perform risk assessment and investigations into the customer’s financial transactions.
While these steps appear tedious, a lot of valuable information can come of it so it is definitely worth the effort. And for businesses looking to streamline the process and achieve faster, more accurate results, online solutions are the answer.