KYC (Know Your Customer) refers to the process of verifying the identity of customers and assessing their risk profile. KYC is a fundamental component of AML and CTF regulations aimed at preventing financial institutions from being used for illegal purposes. The KYC process involves collecting and verifying customer identification information and understanding the nature of the customer’s activities (Citation: UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

• Unwillingness or inability to provide identification or documentation required for KYC. Implement strict customer identification and verification procedures, in line with the Joint Money Laundering Steering Group (JMLSG) Guidance, to ensure that customers provide complete and accurate information (JMLSG Guidance, Part 1, Section 5).

• Use of forged or altered identity documents. Employ digital identity verification solutions, as suggested by the Financial Action Task Force (FATF) Guidance on Digital Identity, to detect forged or altered documents (FATF Guidance on Digital Identity, Section 3.3.3).

• Frequent changes to personal information or account details. Monitor and review customer accounts for unusual activity and perform enhanced due diligence for customers who frequently change personal information or account details (JMLSG Guidance, Part 1, Section 5.3.13).

• Use of aliases or multiple names for a single customer. Establish procedures to detect and investigate the use of aliases or multiple names by customers and escalate such cases for enhanced due diligence (JMLSG Guidance, Part 1, Section 5.3.14).

• Customer appears on any sanctions or watchlists. Implement screening processes against sanctions and watchlists, as required by FATF Recommendation 6, and apply appropriate risk mitigation measures for identified individuals (Interpretive Note to Recommendation 6, Paragraph 2).

• Customer has been identified as a PEP (Politically Exposed Person). Customer is an immediate family member or close associate of a PEP. (JMLSG Guidance, Part 1, Section 5.5.1.)

• Preventative Measure (for previous 2 points): Establish a PEP identification process and apply enhanced due diligence measures for PEPs, their immediate family members, and close associates in accordance with JMLSG Guidance (Part 1, Section 5.5.1).

• Customer’s residential address is inconsistent with the location of their business activities. Verify customers’ residential addresses and investigate inconsistencies between their address and business activities, as outlined in JMLSG Guidance (Part 1, Section 5.3.15).

• Customer conducts transactions using multiple accounts or complex transaction patterns. Monitor customer transactions and identify multiple accounts or complex patterns, as per FATF Recommendation 24, and conduct enhanced due diligence where appropriate (Interpretive Note to Recommendation 24, Paragraph 6).

• Customer provides PO box or virtual office address as their primary address. Implement procedures to verify customers’ physical addresses and flag cases where PO boxes or virtual office addresses are provided, as advised by JMLSG Guidance (Part 1, Section 5.3.11).