The form or the specialized KYC (Know Your Customer) questionnaire is an essential element of the transparent activities of any company, which is used as part of the fight against money laundering.
Such a customer identification and control system is a practical implementation of the measures and principles established by the AML/CFT Act and prescribed in the internal policy system.
The information in this article applies only to the activities of companies registered and operating in the Czech Republic. At the same time, 90% of the information applies to other EU jurisdictions.
Act No. 253/2008 Coll., on certain measures against the legalization of proceeds from criminal activity and financing of terrorism (AML Act), does not contain an explicit requirement to draft the KYC questionnaire form itself. However, according to the law, the obliged person must obtain and document certain information about the client. Therefore, most companies use the KYC questionnaire as a practical and systematized method for obtaining the necessary information from the client.
At the same time, the AML/CFT Act provides for the need to record all measures taken to identify and control the customer and the associated difficulties. For this purpose, a written report shall be prepared based on the KYC questionnaire. The retention period for this information is 10 years from the termination of the business relationship with the customer.
At the same time, the AML/CFT Act provides for the need to record all measures taken to identify and control the customer and the associated difficulties. For this purpose, a written report shall be prepared based on the KYC questionnaire. The retention period for this information is 10 years from the termination of the business relationship with the customer.
Contents of the KYC questionnaire: requirements
Following the regulations of the AML/CFT Act and the latest guidance from the Financial Analytical Office (FAÚ), the KYC questionnaire must contain the following:
- Identification details of the customer as well as persons who may act on behalf of the customer;
- Details of the identity and activities of the client (and/or persons acting on his/her behalf). For example, whether the client is a politically exposed person, whether the client is one of the persons against whom the Czech Republic applies international sanctions according to Act No. 69/2006 Coll;
- Information on the nature of the planned trade or business relationship that gives rise to customer identification and control measures;
- Information on the origin of monetary or other assets used in the transaction;
- Information on the beneficial owner of the customer, who is a legal person or a trust.
What is the KYC questionnaire for?
The form or special KYC questionnaire does not only document in writing the fact that mandatory client identification has been carried out in accordance with the AML/CFT Act, but also allows for the collection of comprehensive information about the client’s financial profile, their connections, and the actual sources of their assets for deeper understanding and control.
A properly completed KYC questionnaire, as well as its regular use, allows companies to make the client identification process much easier and helps reduce the risks associated with money laundering and terrorist financing.
What are the consequences of not having a KYC form?
The risk of improper compliance with anti-money laundering requirements can be significantly increased by not having a KYC questionnaire. This, in turn, may lead to inevitable consequences, namely:
- A reduction in the quality of the identification process and, consequently, the verification of the client;
- Unintended provision of services to undesirable persons;
- Increased attractiveness of the business to fraudsters and abusers;
- Reputational risks;
- Complications in obtaining certain financial and credit services.