This lesson examines the critical regulatory component of onboarding, focusing on KYC, Anti-Money Laundering (AML), and Customer Due Diligence (CDD).
4.1 KYC and AML Foundations
KYC is the process of verifying a customer’s identity and assessing their risk profile. AML refers to the laws and procedures designed to prevent money laundering and terrorist financing. These are non-negotiable parts of the onboarding process designed to prevent financial crime and protect the integrity of the bank .
4.2 Customer Due Diligence (CDD)
CDD is the process of gathering and verifying information about a customer .
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Customer Identification Program (CIP): Collecting basic information: name, date of birth, address, and identification number .
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Beneficial Ownership:Â For legal entities, identifying the individuals who ultimately own or control the company.
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Risk Assessment: Categorizing customers as low, medium, or high risk based on factors like occupation and country of residence .
4.3 Compliance and Verification
Compliance ensures the bank adheres to all legal and regulatory requirements . Verification often uses eKYC (electronic KYC) to automate identity checks using document OCR (optical character recognition), biometric verification, and integration with national databases .
4.4 Post-Acceptance Monitoring
Onboarding doesn’t end with account opening; ongoing monitoring is required to ensure compliance throughout the customer lifecycle, maintaining records of all customer interactions and updating information as necessary .
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