What is KYC?
KYC is an acronym for “Know your Customer”, a term used for customer identification process. For instance, if you plan to open a bank account in Cyprus, the bank will request documents in order to determine the true identity and beneficial ownership of accounts, source of funds, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc, which in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.
Which information is required?
KYC has two components – Identity and Address. Each person, wishing to open a bank account, has to submit documents confirming his/her identity and his/her residential address.
The documents that are usually required are:
- National Identity Card or Passport
- Recent Utility Bill (for the verification of the address)
Which are the objectives of the KYC policy?
- To prevent criminal elements from using the Banking System for money laundering activities.
- To enable the Bank/the financial institutions to know/understand the customers and their financial dealings better and enable them thereby to manage risks more efficiently.
- To implement appropriate controls for detection and reporting of suspicious and/or potentially illegal activities in accordance with applicable laws/procedures.
- To comply with the relevant laws and regulatory guidelines.
- To take necessary steps to ensure that the concerned staff is adequately trained in KYC/AML procedures.
Why is it important to comply with the KYC procedures?
KYC procedure is part of the anti-money laundering laws and regulations, which aim to prevent the practice of generating income through illegal and criminal actions.
What is the legal framework for the KYC procedure in Cyprus?
The Prevention and Suppression of Money Laundering Activities Law, which was enacted on the 13.12.2007, came into force on 1 January 2008. Thereby, the Cyprus legislation has been harmonized with the Third European Union Directive (Directive 2005/60/ΕC) on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.
By enacting the appropriate legislation and implementing the relevant mechanisms for the prevention and suppression of money laundering and terrorist financing activities, Cyprus has demonstrated its commitment to complying with the international treaties and standards in this area.
For any further information on the compliance with the KYC requirements, please get in touch.