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7 Serious Crimes That Effective KYC Compliance Can Prevent

Financial Crime
KYC
May 14, 2021

When people think of professionals who catch criminals, they probably think of police officers or special investigators. But do they think of the compliance professionals working at financial institutions and other regulated firms? Probably not.

KYC professionals play an essential role in combating all sorts of crime around the world. As regulators move to raise expectations for financial institutions, compliance experts become increasingly valuable warriors on the front lines of crime prevention.

Consider how effective KYC compliance helps prevent these serious crimes:

Funding Terrorism

KYC compliance is one of the first lines of defence to prevent organised groups of bad actors around the world from realising their violent intentions. Terrorists require funding to buy weapons and supplies. Without those funds, they cannot operate. Some people will always be willing to join or fund terrorist organisations, but compliance professionals help spot the ways in which terrorist groups access funds to cut them off at the source.

Money Laundering

Not all criminals are terrorists, but almost all criminals do work to obfuscate the lifecycle of their money. KYC compliance goes hand-in-hand with AML compliance. Once funds become legitimised through money laundering, it becomes much more difficult to trace those funds back to the source. Effective KYC compliance throws a wrench into this process and prevents criminals from keeping their ill-gotten gains.

Drug Trafficking

Like terrorism and money laundering, drug trafficking requires (and leads to) enormous sums of money. When global criminal organisations start to use that money, either by stashing it at financial institutions or simply moving it through commerce channels, compliance professionals work with law enforcement to draw connections between the money, the people spending it, and the drug trafficking activities that generated the revenue. Those working in KYC may never see the drugs themselves, but their actions nevertheless play an important role in keeping drugs out of communities.

Identity Theft

KYC stands for "know your customer." If financial institutions knew everything about a customer, they would be able to recognise when someone else started to pretend to be that same customer. Compliance professionals can spot and analyse unusual behaviour to help banking customers realise when they have been impersonated. Together with law enforcement, KYC compliance can help bring down entire criminal rings that rely on identity theft for funding.

Bribery and Corruption

Bribery, corruption, and dirty money in politics, business, and law enforcement remain a touchy and tricky subject around the world. Compliance professionals may not be able to do the investigative journalism required to bring down a dirty politician, but they bring an important piece to the puzzle: honesty. By ensuring the accuracy and validity of financial records, KYC professionals can make it more difficult for bad actors to influence the world through legitimate channels.

Counterfeiting

Cash remains king in many places in the world. However, most cash ends up at a bank at some point or another. When that cash is counterfeit, investigators want to know where it came from, how much of it exists, and who has it. This is another area where the accurate recordkeeping and honesty of KYC compliance comes into play. The more accurate and trustworthy the records, the more easily law enforcement can apprehend the criminals.

Financial Theft

What's more obvious than plain and simple theft? Effective KYC compliance prevents businesses and individuals from being taken advantage of by criminals probing for weaknesses in the system. Sometimes, that comes through more secure protections against identity theft, while other times, the compliance only triggers at the moment of the suspicious transaction. Either way, stronger compliance inevitably leads to less theft.

KYC compliance professionals don't have to be action heroes to be effective protectors. Effective KYC compliance helps companies and law enforcement organisations stop crimes like these, often before they start.

Financial Crime
KYC
May 14, 2021

When people think of professionals who catch criminals, they probably think of police officers or special investigators. But do they think of the compliance professionals working at financial institutions and other regulated firms? Probably not.

KYC professionals play an essential role in combating all sorts of crime around the world. As regulators move to raise expectations for financial institutions, compliance experts become increasingly valuable warriors on the front lines of crime prevention.

Consider how effective KYC compliance helps prevent these serious crimes:

Funding Terrorism

KYC compliance is one of the first lines of defence to prevent organised groups of bad actors around the world from realising their violent intentions. Terrorists require funding to buy weapons and supplies. Without those funds, they cannot operate. Some people will always be willing to join or fund terrorist organisations, but compliance professionals help spot the ways in which terrorist groups access funds to cut them off at the source.

Money Laundering

Not all criminals are terrorists, but almost all criminals do work to obfuscate the lifecycle of their money. KYC compliance goes hand-in-hand with AML compliance. Once funds become legitimised through money laundering, it becomes much more difficult to trace those funds back to the source. Effective KYC compliance throws a wrench into this process and prevents criminals from keeping their ill-gotten gains.

Drug Trafficking

Like terrorism and money laundering, drug trafficking requires (and leads to) enormous sums of money. When global criminal organisations start to use that money, either by stashing it at financial institutions or simply moving it through commerce channels, compliance professionals work with law enforcement to draw connections between the money, the people spending it, and the drug trafficking activities that generated the revenue. Those working in KYC may never see the drugs themselves, but their actions nevertheless play an important role in keeping drugs out of communities.

Identity Theft

KYC stands for "know your customer." If financial institutions knew everything about a customer, they would be able to recognise when someone else started to pretend to be that same customer. Compliance professionals can spot and analyse unusual behaviour to help banking customers realise when they have been impersonated. Together with law enforcement, KYC compliance can help bring down entire criminal rings that rely on identity theft for funding.

Bribery and Corruption

Bribery, corruption, and dirty money in politics, business, and law enforcement remain a touchy and tricky subject around the world. Compliance professionals may not be able to do the investigative journalism required to bring down a dirty politician, but they bring an important piece to the puzzle: honesty. By ensuring the accuracy and validity of financial records, KYC professionals can make it more difficult for bad actors to influence the world through legitimate channels.

Counterfeiting

Cash remains king in many places in the world. However, most cash ends up at a bank at some point or another. When that cash is counterfeit, investigators want to know where it came from, how much of it exists, and who has it. This is another area where the accurate recordkeeping and honesty of KYC compliance comes into play. The more accurate and trustworthy the records, the more easily law enforcement can apprehend the criminals.

Financial Theft

What's more obvious than plain and simple theft? Effective KYC compliance prevents businesses and individuals from being taken advantage of by criminals probing for weaknesses in the system. Sometimes, that comes through more secure protections against identity theft, while other times, the compliance only triggers at the moment of the suspicious transaction. Either way, stronger compliance inevitably leads to less theft.

KYC compliance professionals don't have to be action heroes to be effective protectors. Effective KYC compliance helps companies and law enforcement organisations stop crimes like these, often before they start.

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