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Monday, May 13, 2019

Why the KYCC Derivative Enhances the standard KYC Process


The world and global institutions are enveloped by the regulatory blanket, to implement the necessary procedures to ensure more transparent banking procedures, that result in accountability and added protection for the financial system. These transparent procedures have come to be known as the global KYC AML regulations that are required for financial institutions to necessarily implement. While most businesses and industry people perceive the standard AML KYC to be enough, the persistent threat to the financial ecosystem, needed to be addressed by something more intensive and scrutinizing. In the KYC industry, that is known as KYCC. No, this is not a typo, I actually mean to refer Know Your Customer’s Customer.

Background into KYCC
The financial ecosystem of today is not all so perfect as we assume it to be. Where many loopholes exist that provide leverage for illicit activities to take place if they come to be known. One of them being KYC compliance regulations that do not extend towards shell corporations or similar ‘crown’ superficial entities. It’s quite possible an organization has performed its respective part of diligence obligation on its customers. But whoever gave a thought about that particular customer’s customer, who in turn could be a ‘shell company’? This shell company could be a part of a money laundering scheme or involved in activities with questionable legality. As these entities fall outside of the traditional reach of regulations. The savior? Performing measures of KYCC to inquire about the activities of the customer’s customer.

Implementing KYCC & the Effects on Businesses
A shell corporation’s sole purpose is to mask another company from its liabilities. Setting these up is a great deal. As it is used for the protection of privacy of these entities and the entities it conceals. As the global requirement for addressing the loopholes becomes clear. Implementing KYCC becomes all more necessary as the first derivative of the KYC compliance program. Incorporating KYCC into a businesses compliance program ensures greater security of its customers, business clientele and assets. KYCC addresses the key gaps, where a traditional company could be linked to money laundering. Identifying these earlier on prevents future repercussions in time, allowing businesses to take key decisions and move away from fraudulent elements beforehand.
KYCC takes standard KYC compliance requirements and establishes them on the customer’s customer level. This includes who their customers are doing business with, their source of funds and the authenticity of these payments. Including the perceived risk these entities propose. The point is to unearth the possibility of risk of fraud originating from fraudulent individuals or companies, that might otherwise be hiding in second-tier business relationships. i.e (a customer’s customer).

KYCC for the Better and Beyond
As part of any company’s greater KYC compliance program. It is vital for businesses to understand the requirements of the customer as well as their customers in order to stay on top of the regulatory ladder. Where there are KYC costs, then why not KYCC as well. In order to keep themselves, their operations safe from the potential risks of being used in the proceeds of crime or money laundering.

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