The implementation of KYC elements within the banking sector : a comparative analysis of Maltese banks

Abstract

The purpose of this dissertation is to analyse the implementation of Know Your Customer ('KYC') policies and procedures within the financial banking sector. The research mainly focuses on the importance of implementing the required customer due diligence to prevent risks that arise from inadequate data while safeguarding financial institutions' and financial system reputation as a whole. Secondary research was performed with reference to the FIAU implementing procedures and the FATF recommendations. The objective of this study was achieved through a series of semi-structured interviews with local bank officials and their respective analysis. The banks that participated in this research were HSBC Bank Malta PLC, BOV, APS Bank, Banif Bank, FIM Bank and Lombard Bank. The main findings suggest that all local banks are implementing the 'KYC' policies and procedures adequately. The research also suggests that banks, not only implement these policies and procedures because they are imposed by the FIAU, but also to safeguard their reputation. Furthermore, the findings indicate that the majority of the banks implement a risk-based approach model although it is not imposed by the regulator. The conclusion of this research highlights that the 'KYC' policies and procedures are essential in any financial institutions not only in the banking sector. The reason being that 'KYC' concepts not only verify past performances by customer due diligence but also by continuous and regular monitoring of customers, particularly those customers that may pose higher risks for the financial institution. Hopefully, this study will lead to further local research in the subject matter primarily with respect to the main recommendations identified in this study.