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43 U. Tol. L. Rev. 319 (2011-2012)
Know Your Customer - Or Not

handle is hein.journals/utol43 and id is 325 raw text is: KNOW YOUR CUSTOMER-OR NOT Genci Bilali* I. INTRODUCTION 4(j7NOW Your Customer (henceforth KYC) refers to the IX..requirement for banks and other financial institutions to monitor, audit, collect, and analyze relevant information about their customers (or potential customers) before engaging in financial business with them.' Companies' KYC policies are designed and implemented to conform to a variety 2 of acts and regulations issued by Congress and supervisory agencies. Generally, these policies are intended to not only prevent identity theft, fraud, money laundering, and terrorist financing, but also to help regulate business risks related to lending and investment activities between banks and their customers.3 Failures by commercial and investment banks to implement and fully comply with KYC policies in either lending or product offerings were among the causes of the economic and financial crisis of 2007 to 2009.4 As a result, banking regulators have undertaken sweeping reforms to make KYC policies stronger and more efficient.5 The success of these reforms depends upon the regulators' ability to enforce the rules through the close supervision of financial companies. This article will offer a brief history of the concept of KYC. This article will trace the development of KYC rules in commercial and investment banking, * Attorney at law in New York, and a solicitor in England and Wales. Mr. Bilali specializes in banking, corporate, and finance laws, and has authored and co-authored numerous academic and research papers related to U.S. and international banking laws. He may be contacted by email at gbilali@bilalilaw.com. 1. See Know Your Customer, WIKIPEDIA, http://en.wikipedia.org/wiki/Know_yourcustomer (last visited Jan. 3, 2012). 2. See generally Daniel Mulligan, Comment, Know Your Customer Regulations and the International Banking System: Towards a General Self-Regulatory Regime, 22 FoRDHAM INT'L L.J. 2324 (1999). 3. See generally John J. Byrne, Douglas W. Densmore & Jeffery M. Sharp, Examining the Increase in Federal Regulatory Requirements and Penalties: Is Banking Facing Another Troubled Decade?, 24 CAP. U. L. REv. 1 (1995). 4. Goldman Sachs estimates that plain lending accounted for 95% of bank losses during the economic and financial crises of 2008-2009. See generally The Lex Column, America Sees a Shrink, FIN. TIMEs (London), Feb. 3, 2010, at 16. 5. See generally Onnig H. Dombalagian, Is Financial Reform Too Big to Fail? Emerging from the Financial Crisis with the Help of Increased Consumer Protection and Corporate Responsibility: Investment Recommendations and the Essence of Duty, 60 AM. U. L. REv. 1265 (2011).

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