Last year, the Financial Crimes Enforcement Network (FinCEN) published Anti-Money Laundering (AML) regulations for corporate entities such as banks to comply. Of these Final Rules, these entities must comply with AML compliance with ongoing customer due diligence (“CDD”) that includes creating a customer risk profile and updating customer information somewhat continually (based on risk).
As Anti-Money Laundering (AML) and Know Your Customer (KYC) best practices and regulations continue to evolve on a global scale, one of specific focus is known as the Fourth Money Laundering Directive (4ML). The European Union’s directive seeks to remove any ambiguities in previous legislation and improve enforcement consistencies. At its core, the directive involves using a risk-based approach, combined with online monitoring, beneficial ownership, Customer Due Diligence (CDD), Politically Exposed Persons (PEPs), and Third-Party Equivalence.
The directive has specific guidance where entities will be required to show that they have taken appropriate steps and considered various factors (e.g. customer, product, geography and channel) risks mitigating the threat of AML & CFT (counter terrorizing financing). Further information is given about ongoing monitoring of customers with up-to-date records related to their risk assessment and continual due-diligence.
Focusing specifically on customer due diligence, further guidance has been given recently that impose requirements on “covered financial institutions” – which include banks, broker-dealers, mutual funds, and futures commission merchants and introducing brokers in commodities – to identify the beneficial owners who own or control certain legal entity customers at the time a new account is opened. Here are the highlights regarding customer due diligence:
- Customer Due Diligence for New Accounts – Applies when an account is opened by a new or existing “legal entity customer” – including a corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction that opens an account. This also requires identity verification.
- Ongoing Due Diligence Requirements for Existing Accounts – requirement to identify and verify the beneficial owner(s) of certain legal entities that open new accounts, the Customer Due Diligence Rules formalized the requirement that covered financial institutions incorporate ongoing customer due diligence obligations in their AML compliance programs. One specific procedure related to Identity Management is Conducting ongoing monitoring to identify and report suspicious transactions and to maintain and update customer information (which includes information regarding the beneficial owners of legal entity customers).
Worldview and 4MLD – Customer Due Diligence – 2×2
With the developments in the market, the Worldview platform has features to help comply with customer due diligence guidelines. Because the recent updates include verifying the identities of individuals when the person is not present – like an online purchase or confirming an individual’s identity to sell on an online marketplace, it is best to use multi, high quality data sources to do that. This 2×2 process includes verifying an identity from two distinct and quality data sources – to help with ongoing risk assessments and monitoring of individuals – not just domestically, but globally.
The Worldview Platform provides 2×2 verification in two unique ways. The first is our waterfall approach which is a step approach to utilizing data sources that allows for the best result to be returned based on match/no match criteria at each step of the waterfall. The other is the shotgun approach which broadcasts calls to multiple data sources at once and returns a set of match results.
Both approaches allow Worldview customers to access KYC data from best of breed, in-country sources through one single API. In real-time, and ongoing fashion, customers can constantly monitor the individual constituents of their risk profiling efforts with the expansion messages and codes that Worldview has always provided.