Know Your Customer (KYC) Rules

Identity theft is the single fastest growing crime in the United States of America. Unsurprisingly, the federal government has recently stepped in to crack down on identity theft and to make sure that companies are verifying and authenticating users in order to protect their safety and financial security. One major industry that has had to reform its authentication practices is the finance industry. After September 11th. 2001, the government implemented the Customer Identification Program for financial institutions as part of the USA PATRIOT Act. The Customer Identification Program set out a series of rules and regulations requiring financial institutions to thoroughly and properly identify, verify, and authenticate new customers opening accounts, in order to better keep tabs on the money flowing in and out of America’s banks and financial institutions. For these institutions and organizations, it is of the highest importance to know your customer (KYC) rules. If you do not know your customer (KYC) rules, you could end up inadvertently disobeying federal law. In order to know your customer (KYC) rules, you must review the rules as set out by the PATRIOT Act and confer with governmental oversight and your board of directors.

What is FINRA?

FINRA stands for the Financial Industry Regulatory Authority. It is an independent self-regulatory organization that helps to oversee the securities industry in the United States. FINRA helps to protect investors in America by making sure that the securities industry has transparency and full disclosure. FINRA is not a government organization; rather, it is a private organization. However, because of its involvement with the financial services industry, FINRA reports to the Securities and Exchange Commission. FINRA oversees approximately 4,400 brokerage firms around the United States. In their role as regulator, they help financial services institutions know your customer (KYC) rules. FINRA knows your customer rules and they are an excellent source of information in terms of compliance.

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