Knowing your client is a fundamental part of the due diligence required by the Financial Intelligence Centre Amendment Act (FICAA). The FICAA requires you to identify and verify your clients before you enter into a business relationship or undertake a single transaction. This process goes far beyond just an ID book and proof of address, meaning a simple FICA checklist approach won’t cut the mustard when it comes to ensuring FICA compliance.
According to Oxford Languages, a checklist is “a list of items required, things to be done, or points to be considered, used as a reminder’. Checklists are great in that they can ensure consistency and completeness in carrying out a task, however, a downfall of checklists is that, besides your notepad or online form, there is often no proof that an item was “ticked” off or carried out. The lack of a sufficient audit trail means that when a FIC audit comes up, there is no evidence to prove that the “ticked off boxes” were actually executed.
Checklists are also often inflexible and aren’t adjusted to meet various scenarios. The FIC amendment act takes a risk-based approach and requires accountable institutions to understand their exposure to money laundering and terrorist financing risks – something that changes from client to client.
For example, to start the process of understanding your clients’ risk, you can look into elements such as:
- The source of funds or wealth of your client and their transactions.
- Whether your client is on any sanctioned watchlist.
- If your client holds a prominent, public or influential position in society.
- The nature and purpose of them looking to engage with you.
This information, along with any additional elements that you have evaluated as being good indicators of risk, such as products or services and nature of business, should be used to further assess the potential risk your client and their anticipated business pose to you. The outcome of the client risk will then indicate your next steps, such as whether or not enhanced due diligence checks should be carried out.
Systems such as DocFox can help standardise your KYC operations, set out your minimum requirements, and help you automate the collection of documents and supporting evidence. Additionally, DocFox offers a comprehensive screening solution that provides global coverage for identifying DPIPs, FPPOs, sanctioned individuals and organisations, in real-time. To streamline your KYC process and protect you and your business from bad actors, DocFox can assist you with creating an effective Risk Management Compliance Program (RMCP) tailored to your business.
Who needs a FICA Checklist when you can partner with DocFox! Speak to us today to request a demo.