The Securities and Exchange Commission (SEC) has issued a directive on the adoption and implementation of minimum standardized Know Your Client (KYC) requirements for all capital market operators with immediate effect.
This directive, according to SEC, is in pursuant to “Sections 3, 138 and 209 of the Securities Industry Act, 2016, Act 929, Regulations 7 to 26 of the Anti-Money Laundering Regulations, 2011 (L.I 1987), Part A 1.6, 1.7, 1.13, 1.19 and Part B of SEC/FIC AML/CFT Guidelines, 2019”.
Capital Market Operators are therefore supposed to implement the Minimum Standardized KYC Forms with their new clients starting this January and also ensure that all existing clients’ records are updated to reflect the Minimum Standardized KYC Forms latest by 31st December, 2021, SEC cautioned.
Subsequently, the KYC Forms are going to be used by Capital Market Operators as a guide to design KYC policies and procedures for their institutions by the end of June 2021 to incorporate the following items namely, “Customer Acceptancy; Customer Identification Procedures; Monitoring of Customer Transactions; Risk Management”.
KYC is a significant element in the fight against financial crime and money laundering. Additionally, customer identification is the most critical aspect as it is the first step to better perform in the other stages of the process.
In simple terms, KYC is the mandatory process of identifying and verifying the identity of the client when dealing with them periodically over time and as such it behoves on financial institutions to make sure their clients are genuinely who they claim to be.
To this end, the global anti-money laundering (AML) and Countering the Financing of Terrorism (CFT) landscape raise tremendous stakes for financial institutions. As such, regulatory authorities like SEC which are influenced by standards like the Financial Action Task Force (FAFT) are now implementing strong directives and preventive measures including AML and KYC for client identification.
SEC has further warned that non-compliance to this new directive by Capital Market Operators will attract sanctions in accordance to the law.
“Where there is a breach of any provision stipulated in this Directive, the SEC may take any action(s) specified under section 209(4) of the Securities Industry Act 2016 (929), and/or any other relevant law or any provision applicable under the Securities Industry Act 2016 (Act 929)”
Dealing with issues of interpretation, the Commission has intimated that “where any doubt arises about the meaning of any provision contained in this Directive, the same shall be referred to the SEC and the interpretation provided by the SEC shall be final”.
Finally, the general public has been urged to adhere to the notice and be guided accordingly as the applicability of the directive commences now and shall remain in force until otherwise revised, varied, amended, or revoked by SEC.
The Securities and Exchange Commission (hereinafter referred to as “SEC”) is the statutory body mandated by the Securities Industry Act, 2016 (Act 929) to promote the orderly growth and development of an efficient, fair and transparent securities market in which investors and the integrity of the market are protected.
