Four Key Elements of a KYC Program According to Basel Committee Requirements

D

According to the Basel Committee on Banking Supervision, a Know Your Customer (KYC) program should contain four key elements. These elements are designed to ensure that financial institutions have sufficient information about their customers, understand the risks associated with them, and implement appropriate measures to prevent money laundering and terrorist financing.

The correct answer is B. Customer identification, risk assessment, customer screening, monitoring.

Let's break down each element in detail:

1. Customer identification: This element refers to the process of establishing the identity of a customer. It involves collecting and verifying various identification documents such as passports, driver's licenses, or national identification cards. The aim is to ensure that the institution knows who their customers are and can authenticate their identities.

2. Risk assessment: Financial institutions need to assess the risk associated with each customer to determine the level of due diligence required. This involves evaluating factors such as the customer's country of residence, business activities, source of funds, and transaction patterns. By assessing risk, institutions can allocate resources appropriately and implement appropriate risk management measures.

3. Customer screening: This element involves screening customers against various watchlists and sanctions lists. Financial institutions need to check if their customers are individuals or entities involved in money laundering, terrorism, or other illegal activities. This screening process helps to identify high-risk customers and ensures compliance with regulatory requirements.

4. Monitoring: Once a customer has been onboarded, financial institutions must continuously monitor their activities for suspicious transactions or behavior. Monitoring involves analyzing transactional data, account activity, and other relevant information to detect any unusual or suspicious patterns. This helps to identify potential money laundering or terrorist financing activities and enables institutions to report such activities to the appropriate authorities.

It's important to note that while all the options provided in the question may include some relevant elements, the most comprehensive and accurate answer is B. Customer identification, risk assessment, customer screening, monitoring. These elements collectively form a robust KYC program that enables financial institutions to mitigate the risk of money laundering and terrorist financing.