▶ KYC vs KYC ◀

✅ For the #AML compliance professionals, the most common acronym used during their daily tasks, is the #KYC which is stands for "Know Your Customer." It is a process that financial institutions and other regulated entities use to verify the identity of their clients. The goal of KYC procedures is to prevent money laundering, terrorist financing, and other illegal activities.

✅ During the #KYC process, customers are required to provide various documents and information, such as government-issued identification, proof of address, and sometimes additional documents depending on the institution's requirements. This information is used to establish the customer's identity and assess the risk associated with doing business with them.

✅ BUT, did you ever wonder that the acronym #KYC is also very common in the #financialservices #regulatory #compliance? (Relevant legislation Articles 16(2) and 25(2) of #MiFIDII, and Articles 54(2) to 54(5) and Article 55 of the MiFID II #DelegatedRegulation.

❗ According to #ESMA’s guidelines on certain aspects of the #MiFIDII suitability requirements of 2018, Investment Firms must:

🔹Establish, implement and maintain adequate #policies and #procedures (including appropriate tools) to enable them to understand the essential facts and characteristics about their clients, as a result the Investment Firms need to ⚠ ” know their clients”.

🔹 Firms should take reasonable steps to assess the client’s understanding of #investment #risk as well as the relationship between risk and return on investments, as this is key to enable firms to act in accordance with the client’s best interest when conducting the #suitabilityassessment.

🔹 Information necessary to conduct a suitability assessment includes different elements that may affect, for example, the analysis of the client’s financial situation (including his ability to #bearlosses) or investment objectives (including his #risktolerance). Examples of such elements (information) are the client’s:

🔺 family situation (changes in the family situation of a client may impact his financial situation e.g. a new child or a child of an age to start university); 🔺 employment situation (the degree of job security or that fact the client is close to retirement may impact his financial situation or his investment objectives);

🔺 need for liquidity in certain relevant investments or need to fund a future financial commitment (e.g. property purchase, education fees).