By far numerous sectors within the ambit of the fintech industry, iGaming, commercial and investment areas are nowadays potentially vulnerable to money laundering and funding of terrorism. The two concepts are conceptual oppositions: whereas money laundering aims at converting proceeds deriving from criminal activity into seemingly legitimate assets for re-integration into the financial system, on the other hand the funding of terrorism is more aligned towards the scope for which the said funds are to be used.
Recently for instance new rules have been released by the UK Gambling Commission that came into effect in May 2019, which have imposed stricter regulations than those enforced beforehand for the simple reason that within the gaming sphere funds are most often placed online which creates a higher risk of transparency in transactions. The KYC which is also referred to as the “Know Your Customer” policy is now a mandatory process within the Online Gambling industry and all gambling operators must adhered to it.
The KYC process should be carried out in in line with the 5th AML Directive and other jurisdictional regulations within each country. When such process is carried out diligently it allows for the transactional pipeline of the funds to be easily followed. Thus, limiting the risk of any money laundering activity.
The measures which are to be carried out for AML procedures include the collection and review of customer due diligence, mandatory analysis of risk assessment, diligent recordkeeping and reporting procedures.
At E&S we go by a slightly different approach when speaking of AML. Our team does not simply rest on the completion and fulfilment of a KYC policy but delve deeper into the understanding of each client within their business operations. When you identify the background, the intentions and ideas behind a client’s business, you are able to advise far beyond a structural perspective – this is when the operations become tangible.
Know Your Customer
From a broad perspective KYC is part of the regulatory field of AML that aims to stop the generation of financial income through illegal means. It can be defined as the process of confirming and verifying a customer’s identity and source of funds. Its primary goal is to make sure that individuals or entities are not involved in the financing of terrorism. Customer due diligence is not a one-time measure that is carried out but rather an ongoing monitoring of the entire business activity.
Understanding your Customer
UYC (Understanding Your Customer), on the other hand allows to better grasp the client’s intention, rationale behind the business, the transactions to be carried out, the inflows and outflows of funds and the jurisdictions targeted. This allows for a more efficient and effective running of the day to day administration of the client and caters for a meticulous risk assessment analysis to be performed. Especially when carried out in conjunction with KYC.
We at E&S believe that the advising of clientele through this process would allow for the services provided to be more in-line with such company’s initial aims. Therefore, leading to far more effectual and tailor-made services provided. The name itself suggests a reciprocity where the communication between the subject persons and those carrying out the procedure, allows for mutual development.
This process allows for far more transparency and a more comprehensive level of understanding of how the subject company works and its long-term plans and/or intentions. The reasons for which these aims have been achieved, or have yet to be, can be understood through the information and other criteria that is consistently provided by the subject company or individual.
UYC will not ever be able to replace KYC but rather would help in achieving a far better understanding of clients and their work ethic.
Fully understanding the entire picture allows for a better quality in the services provided, operational success and anticipation of business needs.