KYC Searches

Introduction and Overview

Recently, several of our International Banking clients have raised concerns about complying with emerging Legislation, EU Directives and other proposed rules that will enhance the Know Your Customer (KYC) rule.

ICI has developed a series of programmatic searches that are now being done by offshore facilities to proactively comply with what is expected to be a new, far reaching KYC rule. Some in the industry believe the sanctions against banks may be draconian in nature should a facility fail to comply.

This attempt to "self-regulate" is a means to deflate the potential for adventuristic and restrictive legislation that has emerged as a consequence to the tragic events in Washington and New York.

Brief Background History

The Agencies received an unprecedented number of comments on the proposal from the public, banking organizations, industry trade associations, and members of Congress. Most of the comments reflected public concern over the privacy of information that would be collected and held by financial institutions, and many addressed the expected burden the proposed rule would impose on banks and savings associations.

The Agencies were somewhat sensitive to not only to the concerns raised by the critics, but also to the need to ensure that the institutions regulated adhere to the nation's anti-money laundering statutes, including the Bank Secrecy Act. The Agencies found that there must be an appropriate balance between these legitimate interests. (See 12 CFR Parts 208, 211, and 225, Regulations H, K and Y; Docket No. R-1019).

The Agencies were somewhat sensitive to not only to the concerns raised by the critics, but also to the need to ensure that the institutions regulated adhere to the nation's anti-money laundering statutes, including the Bank Secrecy Act. The Agencies found that there must be an appropriate balance between these legitimate interests. (See 12 CFR Parts 208, 211, and 225, Regulations H, K and Y; Docket No. R-1019).

Here is the full text of the withdrawn rule

The Agencies' withdrawal of the proposed rule does not diminish in any manner their long-standing support for the anti-money laundering provisions of the Bank Secrecy Act. Over the past fifteen years, banking organizations and law enforcement authorities have forged a vital partnership to fight financial crime. This partnership will continue, and will evolve as technology and other factors intensify the challenges we face.

Following the events of September 11, 2001, the EU and its American counterparts decided to resurface the aforementioned rule. It is now expected that a more restrictive rule will be foisted upon the banking community that will directly affect facilities that promise secrecy and a high level of discretion. Thus, any bank operating in the international community or having an "off-shore" facility, will be dramatically affected by the proposed rule change.

The most effective way to dilute the negative impact of regulations that are born out of the suddenness of dark events is to quickly promote and implement "self-regulation" on a voluntary basis. Our clients in Europe and micro-Europe have turned to ICI for such a solution and we have perfected the only process currently available that we are aware of.

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