Proactive Rather Than Reactive KYC Reviews May Enhance Data Precision, Upon Which Accurate Risk-Based Decisions Depend

Tessa Oudkerk, CAMS-FCI

The risk of the potential for elder financial exploitation to become a vehicle for money laundering The recommendations of the Financial Action Task Force (FATF) are “universally recognized as the international standard for anti-money laundering and countering the financing of terrorism (AML/CFT)” . In the face of continuous innovative financial crime techniques and threats, FATF is constantly reviewing and revising its recommendations to “ensure that they remain up to date and relevant” and to safeguard the integrity of financial systems.

With relevance and currency the focus, FATF has enhanced its risk-based approach (RBA) making it an essential foundation of a country’s AML/CFT framework. Understanding the diversity of legal and financial systems worldwide, the implementation of the measures to combat money laundering and the financing of terrorism and proliferation of weapons of mass destruction are meant to be flexible and not prescriptive . As such, FATF has not prescribed to financial institutions the frequency of know your customer (KYC) reviews of legal persons.

The primary aim of this paper is to demonstrate to financial institutions (particularly banks), company registries, anti-money laundering and compliance professionals and policy makers, the value of a proactive approach to KYC review and the possible implications of pursuing a reactive approach that is event driven or based on triggers.

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