When it comes to conducting KYC or vendor risk assessments, a post on Harvard’s corporate governance blog recommends that organizations focus several factors.

What questions do you need to answer as part of your customer identification procedure?

  • Does the entity have a complex corporate structure? As we saw with the Panama Papers, complex structures are often used to intentionally hide beneficial ownership.
  • Does the entity or individual have primary operations in a geographic region that is subject to sanctions, home to terrorist organizations or known for high levels of corruption?
  • Does the entity mask shareholder identities using bearer shares?
  • Does the entity operate in a heavily-regulated industry such as financial services, energy or healthcare?
  • Does the entity conduct any business on a cash basis, and if so, what percentage?

While this isn’t a comprehensive list, it represents a good start for addressing KYC requirements of:

  • Verifying the client identity
  • Identifying beneficial owners of the client
  • Understanding the nature and purpose of the client’s customer relationships
  • Monitoring clients beyond onboarding to spot suspicious transactions

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