Consolidated KYC paper
6 October 2004
The Basel Committee on Banking Supervision today issued a paper that emphasises the importance of banks managing their "know-your-customer" (KYC) risks on a global consolidated basis and provides guidance to banks in this regard. This paper was released for consultation in August 2003 and has since been revised to reflect a number of comments received. It now addresses more explicitly the need for banks to be able to share information with their head offices and urges jurisdictions in which legal impediments remain to remove them.
Consolidated KYC risk management is a complement to the Basel Committee's Customer due diligence for banks issued in October 2001. It examines the critical elements for effective management of KYC risk throughout a banking group. The paper addresses the need for banks to adopt a global approach and apply the elements necessary for a sound KYC programme to both the parent bank or head office and all its branches and subsidiaries. These elements consist of risk management, customer acceptance and identification policies, and ongoing monitoring of higher-risk accounts.
Mr Jaime Caruana, Chairman of the Basel Committee, noted that "Reputation and legal risks have no boundaries, so banks must manage them on a global basis. It is essential that all jurisdictions provide an appropriate legal framework that allows information for KYC risk management purposes to be passed to the head office/parent bank. If a bank is unable to access information on customer accounts held in its foreign branches or subsidiaries as a result of insurmountable legal impediments, it should carefully consider whether it wishes to continue to operate in the jurisdictions concerned".
Notes for editors
Basel Committee on Banking Supervision
The Basel Committee on Banking Supervision was established by the central bank Governors of the Group of Ten countries in 1975. It consists of senior representatives from banking supervisory authorities and the central banks of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States and is currently chaired by Mr Jaime Caruana, Governor of the Bank of Spain. The Committee usually meets at the Bank for International Settlements (BIS) in Basel, where its permanent Secretariat is located.
Cross-border Banking Group
The working group that developed this paper is responsible for monitoring the efficiency of arrangements for supervising international banking groups and their cross-border establishments. The group is co-chaired by Messrs Charles Freeland, Deputy Secretary General of the Basel Committee, and Colin Powell, Chairman of the Offshore Group of Banking Supervisors and of the Jersey Financial Services Commission.
Where can I obtain the full paper?
The text of the paper is available on the BIS website (www.bis.org) as from 10.00 CET on 6 October.