Customer Due Diligence Flashcards
(22 cards)
What are the three lines of defense?
Line of business (front line), compliance/internal control, and audit.
Who reads the KYC customer profile?
Regulators, law enforcement, internal staff (e.g., account managers, management).
What safeguards ensure the security and privacy of customer data?
Customer consent, secure storage, transfer protocols, use limitation, retention/destruction policy.
What are the levels of customer due diligence (CDD)?
CIP, Simplified Due Diligence, Standard Due Diligence, Enhanced Due Diligence (EDD).
Basic info required to identify a natural person?
Name, address, DOB, and national or tax ID (varies by jurisdiction).
Basic info to identify a legal person?
Company name, address, incorporation date/place, business location, government ID.
What are the two documentary verification categories?
Primary (e.g., government ID) and secondary (e.g., utility bill, university ID).
What is non-documentary verification?
Checking data against public records, credit reports, commercial databases.
What does ‘beneficial owner’ mean?
The person(s) with ultimate control over the account funds.
How do legal arrangements obscure links to crime?
Through vehicles like trusts, charities, shell companies where UBOs are hidden.
What are the two prongs of beneficial ownership?
Ownership prong and control prong.
How to calculate beneficial ownership?
Identify all owners back through the chain to UBOs per regulatory thresholds.
Factors affecting beneficial owner verification?
Type of customer, jurisdiction, product, and delivery channel.
What should be learned in CDD on a natural person?
Account purpose, usage, expected transactions and frequency.
Additional checks for a politically exposed person (PEP)?
Account purpose, corruption risk, links to existing customers.
Additional checks for a legal person?
Links to PEPs, sanctions, adverse media.
Additional checks for a shell company?
Investigate UBO, source of funds, company purpose, government links.
What is a ‘four eyes’ check?
A review conducted by a second person.
Intent of Enhanced Due Diligence (EDD) for a natural person?
Broader, deeper review using multiple sources to assess risk.
EDD requirements for a legal person?
Deeper fact-finding into ownership, business nature, and expected activity.
How to determine if due diligence work is ‘reasonable’?
If another institution would find the steps and conclusions justified.
What is the benefit of the “assessing“ steps in the four-step research?
time invested at the start of the process will make the remaining research, decision more efficient and more effective satisfying each of the important audiences.
