FATF has recently issued a High-Risk Jurisdiction Call for Action List of countries. It is known as the blacklist 2023. These countries have outrightly shown weak or no KYC (Know Your Customer) and AML regulatory compliance. As of February 2023, Iran, Myanmar, and the Democratic Republic of Korea are the blacklisted countries. This article discussed the top 5 Global KYC Standards.
FATF Recommendations
The Financial Action Task Force (FATF) is an intergovernmental organization that sets global standards for AML/CFT (Combating the Financing of Terrorism) policies and regulations.
- FATF was founded in 1989 and it operates under OECD (Organization for Economic Cooperation and Development).
- The jurisdiction of FATF is to promote and support the implementation of KYC and AML policies and procedures worldwide. It is to combat money laundering, terrorism funding, and fraud.
- 39 Countries are members of FATF including the US, the UK, Germany, Japan, Australia, and others. Also, its regional jurisdiction includes the European Union as a distinctive member.
- A critically most important standard developed by FATF is KYC Standard. According to the Global KYC Standard of FATF, all regulated countries must ensure full compliance. In this regard, they need to record all the customer’s relevant and important information.
- The FATF’s KYC Standard also requires firms to monitor and report any suspicious transactions and activities in their customer’s profiles.
- FATF’s contributions towards the mitigation of Money Laundering have been recognized globally. The FATF Standards for KYC have helped firms in the prevention of money laundering and maintain global financial integrity.
Wolfsberg Group AML Principles
The Wolfsberg Group is an association of thirteen global banks that have developed a set of AML Principles to guide the industry.
- Founded in 2000 as a response to the Basel Conference, the Wolfsberg Group is an informal group committed to combatting money laundering internationally.
- The Global KYC Standards set by Wolfsberg Group regulate the members and other associated parties. Moreover, they guide the organizations in compliance with the updated KYC and AML regulations.
- It supports the activities of other regulatory bodies all over the world. Providing practical advice and effective solution guidance entails technology to automate KYC and AML processes.
- Woflsberg has proven instrumental in global cooperation for AML compliance and enhancing the best practices for banks and FIs.
At present, Wolfsberg Group regulates 13 banks listed below:
- Banco Santander
- Bank of America
- Barclays
- Citigroup
- Credit Suisse
- Deutsche Bank
- Goldman Sachs
- HSBC
- JP Morgan Chase
- MUFG Bank
- Société Générale
- Standard Chartered
- UBS
KYC Registry of SWIFT
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) offers a KYC Registry that enables banks to exchange and access KYC information on their counterparties.
- Founded in 1973 in Belgium it addresses the need for a more efficient and secure way of financial communication.
- Having KYC Registry as one of their Global KYC Standards, SWIFT leads compliance to a whole new level.
- SWIFT KYC Registry contains information on entities like banks, corporate firms, and other financial institutions. The information is about the beneficial ownership and authorized personnel.
Basel Committee on Banking Supervision (BCBS) KYC Guidelines
The Basel Committee on Banking Supervision (BCBS) provides guidance to banks on various topics, including customer due diligence and KYC requirements.
- Formed in 1974, it has 10 countries as members operating and implementing these guidelines internationally.
- Basel Committee was formed to stabilize and improve the quality of banking supervision worldwide.
- It improved the KYC guidelines and ensured compliance in the regulated member countries.
Furthermore, BCBS guidelines are aimed to set Global KYC Standards promoting a risk-based approach and enhancing due diligence.
The EU’s Anti-Money Laundering Directive
The European Union’s Anti-Money Laundering Directive (AMLD) sets regulations that apply to all EU member states and sets out requirements for customer due diligence, record-keeping, and other AML/CFT measures.
- From 1991 to 2021 there are 6 AML Directives
- They address issues like National Measures, EDD, Increased Scope of AMLD, and Cyber Crime.
Being one of the most concrete advancements in KYC and AML, the AMLD is widely considered a Global KYC standard. It regulates the countries that are also called the Member States of the EU. Ensuring compliance with the AML regulations AMLD guides the financial system for bringing effectiveness.
Country-wise Implementation of Global KYC Standards
Overall, every regulated country is obligated to fulfill the KYC and AML requirements. It is these standards that ensure the countries comply with regulatory requirements. But it is difficult to say that a specific regulation or a standard applies to every country. So, we can say that these standards are somewhat overlapping and cover multiple countries at the same time.
Final Thoughts
Conclusively, the above-explained 5 Global KYC Standards are among many others working globally to fight Money laundering. However, these standards must support and implement the KYC AML guidelines with the common aim of securing compliance and mitigating financial crimes. Also, the financial system’s integrity is maintained when a best practice in KYC and AML is implemented.
