Know Your Customer - Risk Rating

Know Your Customer (KYC) is the practice carried out by companies to verify the identity of their clients in compliance with legal requirements and current laws and regulations. It helps financial organizations detect high-risk customers and protect their businesses. 

The KYC risk rating is a calculation of money laundering risk customers might bring to the company. It ensures that organizations don't do business with a person involved in financial crimes, such as money laundering or terrorist financing. 

Types Of KYC Risk Rating

Low Risk (SDD- Standard Due Diligence): Organizations can apply Standard Due Diligence to their customers marked as Low-Risk. Low-Risk customers bring a potential risk, but it is a million to one that a low-risk customer will harm your company. Organizations can expect a significant number of their customers to be marked as Low-Risk customers. 

Medium Risk (CDD - Customer Due Diligence): Organizations can apply Customer Due Diligence to their customers marked as Medium-Risk. It is a key part of Anti-Money Laundering Compliance. Organizations must use CDD before building business relations as it eliminates potential risks. CDD checks should be performed after a suspicious transaction too.

High Risk (EDD- Enhanced Due Diligence): Businesses can detect high-risk customers and take necessary steps to build business relations using Enhanced Due Diligence and risk-based approach. Organizations can only do business with high-risk customers if a senior manager approves it. Banks 

Ongoing Monitoring

High-risk customers might harm organizations in different ways. Therefore, companies should detect the risk level of their customers during customer onboarding and check them regularly to comply with AML regulations.

Organizations should have up-to-date data when they check their customers. Sanction Scanner provides real-time data published by the USA, the UK, the UN, and local/global regulators. Businesses can get easy-to-understand reports, create GDPR compliance, and carry out Customer Due Diligence and Enhanced Due Diligence measures using Sanction Scanner's AML Screening and Monitoring tool. If you have any questions, you can reach out to our team. 

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