KYC Types

The KYC Types that are available out-of-the-box in Client Lifecycle Management consist of the three following categories:

1. Anti-Money Laundering (AML)/Combatting the Financing of Terrorism (CFT)
2. Product-driven regulations on suitability and Over-The-Counter (OTC) derivatives
3. Tax regulations (for example, CRS and FATCA)

KYC Types that cover AML/CFT regulations use the Situational Layer Cake™ model as the architecture. Common rules are defined in foundational layers, and specialized rules are defined in incremental upper layers. As a result, an incremental layer contains only the delta compared to the previous layer. This incremental layer is based on various factors, but mainly the booking jurisdiction of the product, the risk rating of a customer, and the due diligence profile of the customer.

For example, whenever a customer is onboarding for a product that is booked in Italy, three KYC Types that contain the following requirements are displayed:

1. The Global AML/CFT requirements: The KYC Type is always presented to users for every onboarding journey. It contains the minimum regulatory standards that the financial institution needs to comply with, regardless of the country where the business relationship with the customer is established.
2. The EU AML/CFT requirements: The KYC Type contains the requirements that are issued by the European Union and applicable to all its member states.
3. The Italy AML/CFT requirements: The KYC Type contains the specific requirements for Italy.

For the product-driven regulations category, specific products or categories are the triggers. Still, depending on the law, other factors (for example, the booking country of the product or the nationality of the customer) contribute to deciding whether the relevant KYC Type is displayed.

KYC Types for both Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA) are provided for the tax regulation category. Client Lifecycle Management supports both approaches in the market of what is considered more operationally efficient and has no impact on customers:

• Displaying the relevant questionnaires only as strictly dictated by the regulation, which looks at the product falling within the definition of "financial account."
• Displaying the relevant questionnaires always during onboarding, irrespective of which product the customer purchases, so that the financial institution has already on file the tax status of the customer whenever they may request for the first time a product falling within the definition of "financial account."

KYC Types are dynamic in their applicability because displaying a KYC Type depends on the following factors that the Customer Lifecycle Management system manages by default:

• Customer or Related Party type (for example, entity or individual)
• Booking jurisdiction of the product selected by the customer
• Type of product or service selected by the customer
• Risk rating of the customer or Related Party (for example, Low, Medium, or High)
• Due Diligence (DD) profile of the customer or Related Party (for example, Simplified Due Diligence (SDD), Full Due Diligence (FDD), and Enhanced Due Diligence (EDD))

You can configure more factors in addition to what is available out-of-the-box.

The applicability logic ensures that the KYC Type that is shown in the Pega CLM and KYC application is displayed to users whenever the specific business scenario only occurs if and when needed.

KYC Types are dynamic also because items and item groups can be displayed based on the following factors:

• Customer driver data is collected earlier in the Capture or Enrich stage, such as entity type.

For example, if the customer is a Trust, then a specific set of fields that capture specific data related to this entity type (commonly not seen as a low-risk type (commonly seen as a high-risk type) is displayed, like the type and purpose of the trust and the connection between the settlor and the beneficiary.

• Certain responses are given to items in the same KYC Type.

For example, in the Global AML/CFT Individual CDD questionnaire, a user answers the item on whether the customer is a Politically Exposed Person (PEP) with Yes. Then, additional items are displayed to collect information about the political position, the country of political exposure, and the source of wealth of the individual.

• Certain responses are given to items in other KYC Types.

For example, in the Global AML/CFT Entity EDD questionnaire, the non-face-to-face identification and verification item group are displayed only if the user answers Yes to the item about whether the business relationship is carried out non-face-to-face (for example, without a representative of the customer present) in the Global AML/CFT Entity CDD questionnaire. This type of dynamism also works at the KYC Type level, meaning that a specific input to an item contained in a KYC Type can trigger an additional KYC Type.

A KYC type in the CLM application is equivalent to a subcase on which the user can work. Depending on the mode of due diligence orchestration that is set up to support the Target Operating Model (TOM) of the financial institution, the various KYC Types can be distributed across multiple subcases or consolidated in one single subcase. Based on the data to be captured and assessed, the subcases are routed to the relevant departments according to the TOM.

Check your knowledge with the following interaction: