One of the major operational challenges for banking in kenya locally is KYC compliance in Kenya, which means Know Your Customer compliance.
Several data base solutions have been relied upon to give the results in KYC compliance in Kenya and worldwide. These data bases provide legal backups and reliable reputational risk reduction measure. Information is shared from most financial institutions.
Reasons for KYC compliance in Kenya
KYC compliance in Kenya is important especially after the 9/11 terrorist attacks on the world trade centre. It was confirmed that terrorist attacks were being funded with laundered money, monies earned illegally, for example, means like narcotics trade and human trafficking, organised crime and fraud. With this in mind, it became imperative that KYC compliance in Kenya become an agenda item for all banks. KYC compliance in Kenya is no longer a suggestion for best practice but it has become a compliance mandate for banking in Kenya as in other countries worldwide.
We can therefore infer from the above that KYC compliance in Kenya is a mandate that is imposed on financial services providers or banks locally. This mandate when implemented should identify and verify the bank account applicant before the bank starts to conduct business with the customer. KYC compliance in Kenya is performed on both for the individual as well as the company or entity accounts.
To fulfil risk mitigation strategies, KYC compliance in Kenya must be performed. The key component is to ensure that the prospective customer is not on any government list as wanted for Fraud and money laundering, and is not a terrorist or a fraudster.
When doing KYC compliance checks, any revelation of the possibility of compromise of the applicant, the exposed person must be subjected to enhanced and further due diligence. This will include confirming that the applicants’ sources of wealth are not questionable. There should also not be reputational and financial risk because of who the applicant is and their public positions and associations.
Customers bank deposits and transfers are also scrutinised or monitored against a range of variables in the risk categories as defined by the financial institution. This too forms part of the mandate for KYC compliance in Kenya.
KYC compliance in Kenya: Implications for banks
The KYC compliance in Kenya mandate is very good but it has burdensome administrative implications. Administrators and operations teams must ensure that the mandate is being followed by all in the institution to avoid being penalised. There has to be proof of due diligence for audit purposes for each customer, who must also be identified conclusively.
KYC compliance in Kenya requirements for financial institutions
- Customers must be verified to confirm that they are not or never have been involved in illegal activities like money laundering, fraud or crime
- The applicant’s identity must be verified
- The forms and steps of verification for KYC must be stored securely
- The institution must find out if the applicant is listed on any watch list for fraud, terrorism and crimes like money laundering
KYC compliance in Kenya is a mandate for all financial institutions and auditors ensure that the mandate has been followed. Training must be given to all employees of financial institutions to ensure increased KYC compliance in Kenya.
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