Government-issued passports have been around for a few centuries now and it’s almost impossible to envision a world without them. Imagine having to fill in documentation and providing records that certify your identity and nationality for each country you visited. It would be pretty time consuming for the traveller and even worse for the countries being visited in terms of the number of employees needed to process and confirm the authenticity of the applications and associated documents. Yet, this is exactly the state of affairs in the know your customer arena.
The concept of “know your customer” (or KYC) is as old as banking itself. From modern banking’s beginnings in the 14th century Italy through to the hackneyed image of a stern manager reviewing a loan’s status with a client, the idea of knowing the person you borrowed from or lent to is something very familiar to us all. We are now, however, long past the days when the banker knew all of his or her clients directly or via a referral from a mutual party. The explosive growth and globalization of banking and the introduction of anti-money laundering and KYC regulations in the 1970’s certainly changed that business model. More recently, high-profile million dollar penalties meted out to financial institutions have underlined that KYC requirements are not just the sole concern of small, over burdened compliance functions, but also an issue for the board room. (more…)