Understanding Terms within FICA Compliance Dialogue

South African businesses are grappling with ensuring their FICA compliance. With the Directive 6 deadline on the 31st of May and the Direct 7 deadline on the 31st of July, many businesses are struggling to understand the differences in anti-financial crime terminology.

This article will break down some common phrases and clear up common confusion.

What are some Common Anti-Financial Crime Terms?

-       AML (Anti-Money Laundering)

-       KYC (Know Your Customer)

-       CCD (Customer Due Diligence)

How Does AML Screening Relate to Anti-Financial Crime?

Anti-financial crime is arguably the broadest term available to describe the ways in which governments, authorities, legislature, businesses and industry professionals coordinate to prevent and mitigate financial crime.

This is because anti-financial crime is an umbrella term that covers all of the more specific subtopics, such as identity fraud, money laundering, and countering the financing of terrorism.

Anti-Money Laundering (AML) specifically refers to the interconnected web of laws and practices designed to uncover the finances and capital generated from illegitimate sources, such as violent crime or fraud.

Therefore, although AML laws are closely tied to anti-financial crime, AML is a subcategory/subtopic within the broader discussion of anti-financial crime.

KYC Verifications and AML are NOT the Same

Know Your Customer (KYC) is the process by which a business will verify the identities of their customers/clients to ensure that they are who they say they are.

This verification process designed to make it impossible to commit financial crimes such as money laundering or fraud.  

KYC checks form a vital part of AML. By verifying an individual’s identity during the sign-up process with a business or financial institution, it makes it far harder for that individual to launder money without being caught.

Differences Between Know Your Customer (KYC) and Customer Due Diligence (CDD)

These two phrases are often used interchangeably, but there are notable differences between the two.

In short, KYC typically refers to the initial checks that are done on a customer, whereas CDD typically refers to the entire lifecycle of a customer and all the due diligence checks run during this time. 

More specifically, KYC typically refers to the initial identity verification checks that are done during the onboarding process. For example, the process of verifying a customer’s identity and personal information during the initial sign-up process would fall under the term KYC.

CDD, on the other hand, will cover all of the continuous monitoring and customer rescreening checks that are done so long as the customer remains in a company’s client database. For example, businesses in South Africa are now obligated to periodically rescreening their customer databases in accordance with their Risk Management and Compliance Program (RMCP) so as to ensure that all customer information is up-to-date.

FICA Compliance Solutions for South Africa

As South Africa’s leading provider of KYC, CDD and AML screening solutions, we can help your business to become FICA compliant. To schedule a demo and see how our products and services can empower your business, simply schedule a demo here.