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Know Your Customer (KYC) is a risk management issue and a part of Customer Due Diligence (CDD) for financial organizations and their supporting agencies and correspondent parties.

KYC standards may be subject to significant risks, especially legal and reputation risk. Sound KYC policies and procedures need to be implemented on a global basis KYC polices and procedures not only contribute to a financial institution overall safety and soundness, they also protect to integrity of the system by reducing the likelihood of exchange companies becoming vehicles for money laundering, terrorist financing and other unlawful activities.

Know Your Customer Policy, in part, calls for the exchange companies to document the details of all customer transactions including the customerís intended use of cash withdrawals /transfers via DDs, TTs, TCs and determines the legitimacy of transactions based upon individual customers profiles of normal and expected transactions.

Customer Due Diligence (CDD) policy outlines four essential elements necessary for a sound KYC Policy and Proceduresí for the organizational Head Office and all its branches, subsidiaries or franchise network. These four elements are:

.Customer acceptance policies

.Customer identification

. On-going monitoring of higher risk accounts/transactions, and

. Risk management.

A global risk management program for KYC has incorporated the consistent identification and monitoring of customer transactions globally across business lines and geographical locations, as well as oversight at the parent level, in order to capture instances and patterns of unusual transactions that might otherwise go undetected. Such comprehensive treatment of customer information can significantly contribute to companyís overall reputation, concentration, operational and legal risk management through the detection of potentially harmful activities.


The Banking Policy Department of the State Bank of Pakistan has issued guidelines from time to time for Customer Due Diligence and KYC Policy of the company is closely reflected to these guidelines along with the Basel Committeeís recommendations.

KYC/CDD (Customer due diligence) is not a one time exercise to be conducted at the time of entering into a formal relationship with customer. KYC/Customer due diligence is an on-going process for prudent exchange business practices therefore the company has:

(i) Set up a compliance unit with a full time Head.

(ii) Put in place a system to monitor the transaction above US $ 10000 on a regular basis.

(iii) Updated customer information and records, if any, at reasonable intervals.

(iv) Installed an effective MIS to monitor the activity of the customers activities.

(v) Chalked out plan of imparting suitable training to the staff of the company periodically.

(vi) Maintain proper records of customer identification and clearly indicate, in writing, if any exception is made in fulfilling the due diligence procedure.

(vii) Monitor and check unusually large cash transactions, especially those which are out of character / inconsistent with the history, pattern etc of the individual account(s)


The company has developed guidelines for customer due diligence, including a description of the types of customers that are likely to pose a higher than average risk to the company. In preparing such policies, factors such as customers background, country of origin, public or high profile position, nature of business etc are considered. Enhanced due diligence is applied.

(i) To high-risk customers such as those belonging to countries where KYC and money laundering regulations are lax, those with links to offshore tax havens, customers in cash based business in high-value items, and high net worth customers with no clearly identifiable source of income etc.

(ii) Where they have reason to believe that the customer has been refused banking facilities by another bank.

(iii) For opening of correspondent parties accounts, and taking appropriate measures to obtain all relevant information about the respondent part.

(iv) In dealing with non-face-to-face/online customers. Adequate measures in this regard should also be in place, e.g. independent verification by a reliable third party, client report from the previous company of the customer etc.


Understanding of the customerís business and its activities help a lot to contribute to the companyís overall reputation, concentration, operational and legal risk management through the detection of potentially harmful activates.

Preliminary Knowledge of Customerís Business:

A preliminary knowledge of the customerís business is required in the client/customer acceptance stage in order to determine whether to accept or reject a new entity as a client or to retain or relinquish an existing client.


This knowledge is obtained through the performance of activities such as observation, inspection, inquiry and analytical procedures such as ratio analysis and common size analysis.

.Detailed Knowledge of Customerís Business.

- Core business activities

- Major products/services

- Substitute of clientís products/services

- Major customers

- Major suppliers

- Major competitors

- Related parties/correspondent parties of the Customer

.Significant issues and Policies

- Core business activities

- Address of the business or identification of premises

- Nature of fixed assets a ascertain the Third Party Risk

- Revenue Recognition

- Taxation

- Volume of Foreign currency transactions

.Key Management Personnel

- Directors and their contact no.

- Other management staff and their contact numbers

.External Factors : that may effect customerís business

Economic Factors

- Industry Conditions

- Social / environmental factors

- Technological Factors





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