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Know Your Customer vs. Know Your Intermediary

“Know Your Customer” (“KYC”) programs have been a requirement for U.S. financial services companies since the 1970s, when the U.S. Congress passed the Currency and Foreign Transactions Reporting Act, also known as Bank Secrecy Act (“BSA”). Given the risks associated with managing cash, the legislation required the financial industry to implement controls and systems to comply with BSA and other regulations aimed at combatting money laundering and terrorism financing.

Organizations operating in other industries have not yet been subject to the same level of regulation and scrutiny—until relatively recently. An increasing number of industries are now subject to anti-corruption risks as they use third-party intermediaries, and are required to implement their own version of KYC. Since 2009, 85percent of U.S. Foreign Corrupt Practices Act (“FCPA”) violations that resulted in regulatory action involved an...

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