Ongoing Customer Due Diligence under IFSCA (AML, CFT, & KYC) Guidelines, 2022

The customer’s risk profile is dynamic, varying with changes in some identification details, the nature of business activities the person is associated with, or the transactions executed with the regulated entity. In this context, the IFSCA (AML, CFT, and KYC) Guidelines, 2022, obligates the regulated entities to develop and maintain adequate systems and procedures in place to carry out ongoing Customer Due Diligence.

Ongoing monitoring of the business relationship empowers the entity to determine if the risk emanating from the particular customer is still the same as assessed while onboarding. This ongoing tracking of the customer’s profile assists the entities in spotting the elevation in the risks and timely addressing the same.

Here is an infographic exploring the checks and measures the regulated entity must consider in the course of ongoing monitoring of business relationships:

1. The adequacy, accuracy and validity of the customer’s information must be checked, e.g., the place of the customer’s domicile or the customer’s business activities.
2. Customer activities and transactions must be continuously monitored to develop a pattern and predict the trends to identify red flags.
3. The transaction’s consistency with the customer’s profile must be examined to determine if such activities are normal to the customer’s profile or if there is any irregularity.
4. Any unusual pattern of transactions must be flagged and thoroughly verified to determine the involvement of any proceeds of crime, warranting filing of a Suspicious Transaction Report.
5. During the ongoing review, the entity must also consider the necessity to verify the nature and purpose of the transactions conducted by the customer over a certain period.
6. With complete information about the customer, old and new, including transaction trends, the entity must periodically reassess the customer’s risk classification. If there is any change in the customer’s risk profile, the necessary due diligence measures and controls must be applied promptly.

Ongoing customer relationship monitoring is crucial to staying on top of emerging risks, combating financial crime risks, and complying with IFSCA-imposed AML compliance requirements.

AML India is here to assist the IFSCA-regulated entities in devising the personalized AML/CFT program, focusing on identifying the exposure, developing the proper controls and protecting the business against ML/FT vulnerabilities and non-compliance risks.