Why is Record-Keeping of Customer Identity and Transactions necessary?

It is vital to Record Keeping of Customer Identity and Transactions necessary to comply with the Anti-Money Laundering rules & regulations. Firms required to abide by the rules must keep records to help deter money laundering activities.

What is Record-Keeping?

Firms must keep records of customer identity and transactions to comply with local regulatory obligations. The documents can act as evidence if law enforcement conducts an investigation, so they need to make them available to the agencies. Firms must maintain updated records and regularly communicate with their clients to keep records of updated information.

What Type of Records are required to be maintained?

The types of records that companies need to maintain depending on the regulations they need to follow. Still, the essential requirement is that the company provide all the scanning, screening, and verification process details. Below are mentioned some records that firms should maintain.

Defining customer information
Transactions
MLRO annual reports
External and Internal suspicion reports;
Investigation records
Information that is not processed
Actions taken after agency’s' requests
Training Registers

A few of these records can be categorized as follows-

Customers Information

The CDD process includes verifying the customer’s identity and keeping a copy of references and other related pieces of evidence. Other documents include a copy of identities and any other additional information that must be maintained to facilitate regular monitoring of the records. Companies must also keep customers’ scanning process records on various checks such as PEP and Sanction. They can present them as evidence to the investigation agencies as and when needed.

Transactions

Businesses have to keep a record of the business relationship- transactions involved from five years of completing the transaction. The various transaction records involve credit and debit notes and correspondence with the particular business. Firms to maintain all the documents to provide a satisfactory response to the audit firms. They need to create a detailed financial profile of suspicious customers. It helps in detecting fraud early and preventing money laundering. In cases where the claim is made on an asset and exists for more than five years, then the period will be extended.

Internal and External Suspicion Reports

To meet the internal and external reporting requirements, firms must maintain all records of the transactions. Firms should also keep records of the times the compliance officer has reviewed. MLRO- The Money Laundering Reporting Officer has to make sure the firm complies with the anti-money laundering controls. They handle all the information and look into the suspicious cases of money laundering, disclosing the matters to law enforcement.

How to Maintain Customer Identity and transaction records?

Record keeping procedure depends on local and global regulatory requirements. The number of records required to be maintained affects the record-keeping method. Some standard ways of keeping a record of the customer’s identity are mentioned below-

It is noteworthy that the records maintained should be easily accessible and stored accordingly, keeping the scalability and expansion plans of the firms. The documents should be made available whenever required, irrespective of mergers and acquisitions. There’s no particular rule for maintaining a specific location for the records, but what is primarily needed is that they are quickly retrieved when required.

But it is the agencies’ responsibility to ensure that the records maintained in foreign countries adhere to the same record-keeping rules. If the documents are kept in a foreign language, resources must be available to convert them into English. Firms need to maintain the records and provide them to the enforcement agencies. Firms must maintain records until the investigations are over and the firm is notified that the ongoing case has been closed. They can destroy the records as the record-keeping requirements of the local jurisdiction if they have not been informed of an investigation within five years of making a statement.

Conclusion

We at AML UAE offer advanced solutions that help organisations comply with AML regulations. After customer screening on different parameters such as PEP, UBO, and Sanction, organisations can create reports of the query results with structured data. The report displays all the updated information about the scanned persons. Also, during the audit process, these queries can be viewed and analysed, which act as strong evidence of the record-keeping activities and presented to the regulators.

Transaction Monitoring software immediately detects any suspicious element in the database during transaction verification. The compliance team can instantly detect any fraudulent activity and report it to the respective institution. Get in touch with AML UAE to know more about the AML software.

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About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 25 years of experience in compliance management, Anti-Money Laundering, tax consultancy, risk management, accounting, system audits, IT consultancy, and digital marketing.

He has extensive knowledge of local and international Anti-Money Laundering rules and regulations. He helps companies with end-to-end AML compliance services, from understanding the AML business-specific risk to implementing the robust AML Compliance framework.