Case Study

What are the AML and KYC obligations of a Bank in the UK?

Banks in the UK are required by law to comply with anti-money laundering (AML) laws and Know your Customer (KYC) requirements to prevent criminals and terrorists from using financial products or services to store and move around their money. In the UK these requirements come mainly from the Money Laundering Regulations Act 2007 and apply across a range of sectors and institutions. KYC information that is gathered is also used to help Banks adhere to the strict financial sanctions regimes that are in place across the globe.

These regulations require banks to perform ‘Customer Due diligence’ (CDD) measures such as

(a) Identifying and verifying the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source;

(b) identifying, where applicable any beneficial owners and verifying their identities on a risk sensitive basis

(c) Obtaining information on the purpose and intended nature of the business relationship as well things like source/origin of funds. There are also additional enhanced due diligence requirements for Politically Exposed Persons (PEPs), specifically around source of wealth.

This also requires the Bank to understand the purpose and intended nature of the business relationship; this includes understanding where the customer’s funds and wealth come from. Following a risk based approach, Banks have to obtain sufficient information to develop a comprehensive profile of the customer and, where applicable any beneficial owners, and to understand the risks associated with the business to ensure it’s within appetite.

These checks and procedures are both required when an account is first opened and must be regularly monitored over time. This will often be at least annually but can be more frequent.