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 selected measures against the legitimization of the proceeds of crime and financing of terrorism, does not explicitly require such a KYC questionnaire. However, many companies use this practical method to record specific customer identification and control stages.
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;
- Documentary evidence of the origin of the funds of the client, who is a politically exposed person;
- An assessment of the risk of money laundering possessed by the client following the procedures laid down in the internal policy framework;
- The date of the previous and next assessment.
What is the KYC questionnaire for?
The form or special KYC questionnaire records the customer identification that all companies regulated by the AML/CFT Act must conduct.
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.