Which are essential elements of a KYC program identified by the Base1 Committee on Banking Supervision? (Select Two.)

Question

Options

• AInternal control
• BCustomer acceptance policy
• CCode of conduct
• DRisk appetite
• ERisk management

• A
  8% (3)
• B
  70% (26)
• C
  19% (7)
• D
  3% (1)

Explanation

According to the Basel Committee on Banking Supervision, a sound KYC program should include four essential elements: customer acceptance policy, customer identification, on-going monitoring of higher risk accounts, and risk management. Customer acceptance policy defines the types of customers that the financial institution (FI) is willing to accept and the criteria for doing so. Customer identification involves verifying the identity and beneficial ownership of the customers and obtaining information on their activities and sources of funds. On-going monitoring of higher risk accounts involves reviewing the transactions and behavior of the customers that pose higher risks of money laundering or terrorist financing and updating their information and risk profiles. Risk management involves establishing appropriate policies, procedures, controls, and audit functions to ensure the effective implementation and oversight of the KYC program.

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