|Know Your Customer Policy|
The Basel Committee on Banking Supervision in its paper on Customer Due Diligence for Banks published in October 2001 issued guidelines for the implementation of Customer Due Diligence for Banks. The purpose of the document was to assist banks to recognise the importance of ensuring that they have adequate controls and procedures in place to enable them know the customers with whom they are dealing.
The document was also intended to provide the framework that will serve as benchmark for supervisors to establish national practices and for banks to design their own programmes.
The requirements of the document were consistent with Principle 15 of the Basel Core Principles Methodology which states that "Banking supervisors must determine that banks have adequate policies, practices and procedures in place, including strict 'know-your-customer' rules, that promote high ethical and professional standards in the financial sector and prevent the bank being used, intentionally or unintentionally, by criminal elements.
In pursuance of the above objectives, the Banking Supervision Department circularised the due diligence document to the banks for their guidance in establishing know-your-customer policies and procedures. After nearly two years the BSD observed that most banks have not developed comprehensive KYC procedures and that the banks were not moving quickly enough to conform to international standards in this respect.
Consequently a meeting was held between the Banking Supervision Department and the banks to discuss the structure of the format that would be comprehensive enough to provide minimum guidelines to be used by banks in .
Based on the conclusions reached, a proposed format that represented the minimum requirement was composed and referred to the banks for their comments. The bank's responses were collated and incorporated into the attached format.
The format ensures that banks in the country develop clear customer acceptance policies and procedures that include guidance on the types of customers that are likely to pose a higher than average risk to the banks, including managerial review of such prospective customers where appropriate.