What it Means to Know Your Customer

Posted on August 3, 2009 - Filed Under Government, Security

What exactly does it mean to know your customer? How important is it? And why is it important in the first place? To know your customer simply means to know who you are dealing with, with whom your name or your businesses name will be connected. This has to do with performing measures on a regular basis when signing on knew clients or business partners and associates. The due diligence of collecting and analyzing information about the identity of and the past actions of individuals and companies throughout the world.

This has not only been recommended through provisions in the U.S. Patriot Act and the Bank Secrecy Act it is now required by law. The policy of know your customer is extremely important for various reasons, not withstanding the consequences of federal charges and prosecution. The act serves to uncover those who are involved in identity theft, fraud, money laundering and terrorist financing.

There are lists of suspected terrorists and money launderers available online through the Office of Foreign Assets Control. That is the first step an individual or a corruption is likely to take when considering the new business partner or venture. The list is extensive and updated each month. There are also third party companies that investigate and keep track of those that are found to be high-risk individuals or companies, due to past actions or criminal involvement with corruption.

Aside from matching names on a list, it is also important to check the businesses records, including the accuracy of the accounting departments. The trouble begins when a company does not thoroughly investigate future clients or customers. If those customers are found to have broken laws in the past, or break the laws while one is involved with them, they will also find themselves the subjects of investigation and possible prosecution.

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