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BANKING
determine the identity of the ultimate various proceedings have been initiated
owners of these companies and who did or measures have been imposed, so the
not conduct the required procedures for banks are obliged to monitor these open-
due dilligance and the KYC procedures, so ings of bank accounts and transactions in
words are spread about some “lite” vari- order to prevent the movement of funds
ant which Mossack Fonseca performed by these legal entities and natural persons.
for one of the banks, at the request of the
banks as an exclusive service, of course for The establishment of effective KYC
a compensation. rules and policies is an integral and neces-
sary part of the policies for risk manage-
Actually, globally observed, the regula- ment not only of the banks, but also of all
tion for the prevention of money launder- non-financial entities for which the laws
ing and terrorism financing is very detailed, that regulate prevention of money laun-
rigid and it sets a lot of requirements to all dering and terrorism financing apply. The
entities that should implement it, both in failure to establish an appropriate system
terms of human resources, as well as in for management of these risks exposes
terms of technical resources and invest- the entities to high legal and reputation
ments in information technology. At every risk, that is, it leads to their aware or un-
moment, several black (sanction) lists are aware exposure as instruments through
being monitored, where there are thou- which money laundering, terrorism fi-
sands of persons and companies for which nancing and other illegal activities can be
performed. This is particularly important
Usually the KYC risk management system includes: when it comes to large groups that work
on several territories whereby effective
1policies and procedures that refer to the risk group standards should be established,
management process; and their application should be consis-
tently controlled, considering that the
2policies for acceptance of clients; risks addressed by these standards have a
global character. Therefore the term con-
3procedures for identification of clients and ultimate solidated KYC risk management process is
owners; increasingly used in the practices of risk
management, which implies a centralized
4establishment of an effective process of monitoring process through which all relevant poli-
and informing on the movements on the clients’ bank cies and procedures are coordinated for
accounts and a distinction between regular and suspicious exchange of information and implemen-
transactions; tation of appropriate activities related to
identification of clients and related people.
5strengthened analysis of transactions that will be Usually the KYC risk management system
assessed as high-risk transactions; includes:
6strengthened analysis of the politically exposed people, 1) policies and procedures that refer to
so called PEP’s (politically exposed persons); the risk management process;
7policy in regard to the keeping of records both about 2) policies for acceptance of clients;
the client, as well as about each individual transaction. 3) procedures for identification of cli-
ents and ultimate owners;
4) establishment of an effective process
of monitoring and informing on the move-
ments on the clients’ bank accounts and
a distinction between regular and suspi-
cious transactions;
5) strengthened analysis of transactions
that will be assessed as high-risk transac-
tions;
6) strengthened analysis of the politi-
cally exposed people, so called PEP’s (po-
46 May 2016
