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This time, I would like to take the time to explain to you what KYC is, the historical background of its creation, and why it is needed. There is too much to cover in one article, so I will divide it into three series.
Today, we will learn about G7 and FATF, which are the background to the first international KYC.
Year of 1989, G7 meeting and launch of FATF
The G7, which began with the need for the international community to jointly deal with the global economic crisis, was an official and high-profile meeting where finance ministers from countries with high influence on the global economy gathered to discuss and coordinate solutions to global issues. As time passed and the importance of the meeting grew, it was upgraded to a summit.
As the economy develops globally, a keynote meeting was held on the need to eliminate risk factors while continuously developing policies to improve economic efficiency and flexibility.
Below is the introduction to the economic declaration.
At this G7 summit, it was decided to establish a task force to prevent money laundering using financial institutions internationally, and this task force was launched under the name of FATF (Financial Action Task Force).
In April 1990, less than a year after its establishment, the FATF published a report containing '40 Recommendations', which provided a comprehensive action plan to prevent money laundering, laying the foundation for an international standard for anti-money laundering. It's possible. These recommendations are continually being refined and strengthened.
Just by looking at the table of contents of the recommendations, you can see what the FATF is all about.
The goal is to "systematically block the flow of illicit financing for terrorism, narcotics, and other purposes from each jurisdiction, and then to fully control it through international cooperation.
FATF Membership Status
Europe-Middle East (21 countries, 1 organization)
United Kingdom, Ireland, Iceland, Germany, France, Netherlands, Belgium, Luxembourg, Austria, Switzerland, Italy, Spain, Portugal, Greece, Sweden, Norway, Finland, Denmark, Russia, Israel, Saudi Arabia, European Commission
Americas-Other (6 countries, 1 organization)
United States, Canada, Mexico, Brazil, Argentina, South Africa, Gulf Cooperation Council
Asia-Pacific (10 countries)
South Korea, Australia, New Zealand, Japan, Turkey, Hong Kong, Singapore, China, India, Malaysia
The recommendations issued by the FATF are recognized as international standards by about 180 countries around the world. The recommendations are based on a country-by-country basis and must be applied in consideration of the situation in each country. In addition, the recommendations are secured through mutual evaluation of member countries to ensure de facto binding.
Currently, 37 countries, including the United States, South Korea, the United Kingdom, China, and Japan, and two international organizations, the European Commission and the Gulf Co-operation Council, are members. The FATF is actively working to establish international anti-money laundering standards and strengthen international cooperation.
Customer Due diligence (CDD)
The FATF's recommendations, No. 10 and 11, "Customer due diligence and record keeping" are fundamental to what we now call know your customer (KYC).
In particular, No. 10 states that financial institutions should be required by law to verify the identity of their customers.
eKYC's journey with ARGOS
In this article, we've told the story of KYC for financial institutions, from the G7 to the FATF's CDD.
Next time, we'll talk about how the FATF's CDD recommendations are applied by national jurisdictions and how the "recommendations" evolve into legislation and mandatory regulations.
ARGOS will continue to strive to make your authentication journey more convenient and secure. Join us in making your online world safer and more convenient!