This invention relates generally to a method and system for facilitating the identification, investigation, assessment and management of legal, regulatory, financial and reputational risks. In particular, the present invention relates to a computerized system and method for banks and non-bank financial institutions to comply with know your customer requirements associated with a financial transaction initiated by a primary bank on behalf of a customer.
As money-laundering and related concerns have become increasingly important public policy concerns, regulators have attempted to address these issues by imposing increasing formal and informal obligations upon financial institutions. Government regulations authorize a broad regime of record-keeping and regulatory reporting obligations on covered financial institutions as a tool for the federal government to use to fight drug trafficking, money laundering, and other crimes. Such a body of regulation is designed chiefly to assist law enforcement authorities in detecting when criminals are using banks and other financial institution as an intermediary for, or to hide the transfer of funds derived from, criminal activity.
Bank and non-bank financial institutions, including: investment banks; merchant banks; securities firms, any insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h)); a commercial bank or trust company; a private banker; credit union; thrift institution; broker dealers; securities and commodities trading firms; asset management companies, hedge funds, mutual funds, credit rating funds, securities exchanges and bourses, institutional and individual investors, law firms, accounting firms, auditing firms, or any institution the business of which is engaging in financial activities as described in section 4(k) of the Bank Holding Act of 1956; may be subject to legal and regulatory obligations to “know your customer” (KYC).
KYC obligations may be particularly difficult to meet in a situation where a financial institution that will take an action on behalf of a customer of an intermediary financial institution. Situations can arise, for example, where an intermediary financial institution may wish to provide a service or product to a customer of intermediary financial institution but not be able to provide the service themselves. The action can include, for example, a request to open an account, execute a financial transaction or take some other action. The intermediary financial institution may approach a Primary Financial Institution and request that the Primary Financial Institution provide the necessary service. The Primary Financial Institution may have a working relationship with the intermediary financial institution, but not have any knowledge of the ultimate customer. Taking an action on behalf of an unknown customer can result in an increase in Risk for the Primary Financial Institution.
What is needed is a method and system to minimize Risks associated with conducting transaction on behalf of a customer of an intermediary financial institution. coordinate and administer a certification that can receive and present information about a customer to any financial institution that will act on behalf of the customer. Compiled certification information should be situated in a known resource from which it can be conveyed to a compliance department or government entity and also be able to demonstrate to regulators that a Financial Institution has met standards relating to risk containment.