Money Laundering Laws and KYC Rules

All EU countries should have implemented the Money Laundering laws and KYC rules, based on EU’s third money laundering directive from 2005. The directive is clear and covers more industries and set high standards on customer due diligence in terms of both individuals and businesses, including its representatives. In addition to having good customer knowledge, the law requires them to have internal guidelines and policies for risk management, follow inspection bodies, train staff and have procedures for customs documentation and archiving of information.

Rules on Know Your Customer

Getting to know your customer includes so much more than the initial identity check to establish an identity. You also need to check each customer’s source of funds and the purpose of the business relationship. If the customer is a company; the customer’s business, finance and ownership strictly controlled. Representatives must be identified and you have to check that they really have the right to represent the company. At any suspicion, that everything not is right, the customer must be reported to the authorities in the EU country where the reporting obligated person is operating. Verification of KYC compliance and the new laws are managed by a number of authorities that are collaborating across borders.There are companies today that provide customers due diligence services and make sure that clients are in compliance with KYC law and regulations.

Companies and businesses covered by the Money Laundering Laws:

• Banks, brokers, credit markets and securities companies.
• Insurance and life insurance companies.
• Auditing and accounting companies.
• Companies that provide corporate services.
• Real estate brokers.
• Advocates and associates.
• Companies that deal in antiques, fine art, gemstones, metals, scrap or transportation in case the payment is made in cash in an amount of EUR 15.000 or more.

KYC Compliance Tips:

• The first identify your existing customers: Start with introducing identification guidelines and storing personal and corporate identities in your customer database.
• The second update your customer database at specific intervals: Customers can move, rename, the new income – be sure to have accurate and current information in your records.
• The third identify and verify identity of new customers.
• The fourth get more information about your customers: Who are they, what they earn, what are their activities, etc.
• The fifth if suspicious, check for any financial or tax crimes!

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