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Central banks tighten up on KYC risks

06 October 2004  |  3249 views  |  0 cash - dollars

Banking regulators are pressing banks to manage their 'know your customer' (KYC) risks on a global consolidated basis and suggesting that they move from territories where legal impediments prevent information sharing on customer accounts.

In a revised paper issued today, the Basel Committee on Banking Supervision explicitly addresses the need for banks to be able to share information with their head offices and urges jurisdictions in which legal impediments remain to remove them.

The paper addresses the need for banks to adopt a global approach and apply the elements necessary for a sound KYC programme to both the parent bank or head office and all its branches and subsidiaries. These elements consist of risk management, customer acceptance and identification policies, and ongoing monitoring of higher-risk accounts.

Jaime Caruana, chairman of the Basel Committee, notes that reputation and legal risks have no boundaries, so banks must manage them on a global basis.

"It is essential that all jurisdictions provide an appropriate legal framework that allows information for KYC risk management purposes to be passed to the head office/parent bank," he says. "If a bank is unable to access information on customer accounts held in its foreign branches or subsidiaries as a result of insurmountable legal impediments, it should carefully consider whether it wishes to continue to operate in the jurisdictions concerned."

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