In the United Kingdom, Know Your Customer is a practice often used by financial institutions and banks to comply with the Money Laundering Regulations. It is also useful for SMEs, as they could face fines, sanctions, or reputational damage if they do business with money launderers or terrorists. Moreover, KYC and KYS can protect their organization from fraud and losses resulting from illegal funds and transactions.
Know your customer (KYC) and supplier (KYS) are processes that verify the identities, suitability, and potential risks of customers and suppliers, especially in relation to money laundering, fraud, and terrorist financing. Customer and supplier contracts, agreements, and equipment leases are essential for a company’s commitments.
KYC and KYS are beneficial for any business, regardless of its size. Trade is a common factor in the business cycle, so it is crucial to know who you are dealing with.
The process consists of:
Customer/Supplier Identification Review (CIP)/ (SIP)
The minimum requirements to open an individual financial account are specified in the CIP:
– Company Name
– Principal contact
– Company Identification number
– Tax Identification number VAT, PAYE, UTR
The identity of the account holder must be verified “within a reasonable time” after gathering this information. The verification methods include documents, non-documentary methods (such as comparing the information with consumer reporting agencies, public databases, or other due diligence measures), or a combination of both.
These procedures are the core of CIP/SIP; they should be followed consistently and diligently as part of the Anti-Money Laundering (AML) compliance requirements.