Consultative paper on customer due diligence
31 January 2001
The Basel Committee on Banking Supervision today issued a consultative paper providing guidance to banks and banking supervisors on customer due diligence. This paper forms part of an ongoing effort by the Committee to strengthen risk management procedures in banks around the world.
National supervisors are responsible for ensuring that banks have minimum standards and internal controls that allow them to know with whom they are doing business. Banks must develop customer due diligence policies and procedures in four key areas: customer acceptance, customer identification, ongoing monitoring of high-risk accounts, and risk management.
William J McDonough, Chairman of the Basel Committee, said: "Rigorous customer due diligence is a key part of banks' risk management, and critical to safeguarding confidence and the integrity of the banking system."
The paper Customer due diligence by banks was drafted by the Working Group on Cross-border Banking, a joint working group of the Basel Committee and the Offshore Group of Banking Supervisors. Colin Powell, Co-Chair of the Working Group and Chairman of the Offshore Group, stated: "Supervisors should ensure that banks apply an acceptable minimum standard of customer due diligence policies and procedures to all areas, embracing domestic and overseas operations, and corporate and private banking businesses. Banks should never enter into a business relationship until the identity of the customer is satisfactorily established." Charles Freeland, Deputy Secretary General of the Basel Committee and the other Co-Chair, added: "Many countries around the world have not developed basic supervisory practices in this area and have looked to the Basel Committee for insight. This paper will provide the framework for them to set national supervisory standards."
Invitation to comment
This consultative paper on customer due diligence is available on the BIS website (www.bis.org). The Basel Committee invites comments on the proposals from all interested parties, including bankers and supervisors. Comments should be submitted by 31 March 2001 to the Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland, with copies to the national supervisory authorities, as appropriate.