process that banks use to identify and verify the identity of customers is
known as ‘Know Your Customer’ (KYC). The objective of KYC is to enable banks to
know and understand their customers and their transactions better and help them
manage their risks effectively.
example, banks obtain certain information from customers and verify it against
documentation e.g. a client’s name, surname and ID number.
is an important aspect developed globally to combat identity theft, financial
fraud, money laundering and terrorist financing.
is extremely important that banks perform a KYC on customers for the following
i.To positively identify who the client is in order to prevent
conducting transactions with a fraudster which in turn protects both the client
and the bank;
ii.To obtain valuable information in order to understand
client needs and what products to offer them;
iii.In order to comply with banking obligations in terms of
the Financial Intelligence Act (FIA) to identify and verify customers; and
iv.To allow banks to risk profile customers and
accordingly manage money laundering and terrorist financing risks.
from KYC being a regulatory requirement with which banks have to comply with as
per the FIA regulations, it is also very important as it helps banks understand
their customers and their financial dealings.
key aspect about banking is that one must investigate the money trail to see
where it starts and where it ends. Once the money trail is established, it is
easy to track down the culprits and this is fundamentally why banks should have
accurate, reliable, and updated KYC norms in place for all customers,” said
Baronice Hans, Chairperson of the Bankers Association of Namibia (BAN).
obligations came into effect in 2009 when the 2007 FIA promulgated. The Rules
Based 2007 FIA has since been replaced with the newer 2012 FIA which is Risk
Based. Performing KYC not only allows banks to comply with FIA, but also to
manage money laundering and terrorist financing risk by identifying potential
higher risk customers.
a credit perspective KYC plays an imperative role when assessing an
application, “as we want to evade the likelihood of falling victim of illegal activities
perpetrated by a customer(s).”
“KYC is one of the regulations set in place
under FIA that obliges Nedbank to take full responsibility to collect as much
information as possible from the client in order to strengthen their
relationship with the Bank. KYC is an indispensable part of our banking
operations, whether it relates to opening an account or for the advancement of
loans to ensure that the services are not misused,” Hans concluded.
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