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Know Your Customer procedures and Anti-Money Laundering Directive

​​​​​​The global anti-money laundering (AML) and countering the financing of terrorism (CFT) landscape ultimately raise tremendous stakes for financial institutions. International regulations influenced by standards like The Financial Action Task Force (*FATF) are now implemented in national laws encompassing strong directives like AML 4 and preventive measures like "KYC" (know your customer) for customer identification.

Know your customer 

Anti-Money L​​aunderin​​​g Directive

In Europe, the fourth Anti-Money Laundering (AML4) directive entered into force in June 2017, with a new set of rules to help financial entities protect against the risks of money laundering and financing of terrorism.​​

This latest version of AML directive brought new challenges for financial institutions:

  • Improve understanding of customers and their financial dealings to minimize risk
  • Stricter Customer Due Diligence
  • Control customer identity and share data with central administration
  • EU member states must implement the directive within two years

​​​​Kno​w Your Cust​omer (KYC) and Customer Due Diligence measures (CDD)

The 'Know Your Customer' Policy, commonly referred to as 'KYC', is a mandatory framework for all banks and other financial institutions used for customer identification process. To comply with international regulations against money laundering and terrorist financing, reinforced Know Your Customer procedures need to be implemented in the first stage of any business relationship when enrolling a new customer;

Banks usually frame their KYC policies incorporating the following four key elements:

  • Customer Policy;
  • Customer Identification Procedures;
  • Monitoring of Transactions;
  • Risk management.

KYC starts with the simple task of checking that customers are who they say they are. In the financial sector, this involves the verification of a customer's identity through documents including, for example, a national ID Document. For some this is still essentially a paper-based check; for others it's a digital process that involves verifying that an identity document is genuine or even going further to authenticate the holder of the document through the use of additional biometric checks such as facial or fingerprint recognition.

A digital ID verification process enables a bank to automatically capture customer demographic data which can be integrated into enterprise systems like a CRM to streamline the customer onboarding process, conduct further due diligence and risk assessment and if necessary link to external resources to review for PEPs (Politically Exposed Persons).

Financial institutions are also required to maintain records on transactions and Information obtained through the Customer Due Diligence measures. These requirements should apply to all new customers and also to existing customers on the basis of materiality and risk.

KYC is a major element in the fight against financial crime and money laundering and customer identification is most critical as it is the stepping stone to better perform in the other stages of the process.

How Gemalto can help

With strong expertise in ID verification for governments, Gemalto also supports private customers by providing a solution that helps them comply with the new rules, particularly those regarding CDD (Customer Due Diligence) and KYC (Know Your Customer) obligations.

ID Verification helps banks provide a smooth customer onboarding experience that complies with KYC regulations and minimizes the risk of fraud. Our solution automatically provides, in a matter of seconds:
  • digital capture of customer information for instant auto-fill in enterprise data systems
  • multichannel identity document verification, with adaptable security levels
  • option of customer authenticat ion using biometric technologies
  • option of customer risk assessment through the review of PEPs, sanction or watch lists​

Find out more about ID Verification​

*FATF recommendations 2012