KYC vs. CIP

Question: In training sessions, staff has asked me what the difference is between the old Know Your Customer standard and the new Customer Identification Program and why we have to change everything. Can you help with a simple explanation?

Answer: We can try. The easiest way to explain the difference is that there really isn't a difference worth worrying about - only a name change. And the name changed because Congress wanted to infuse some fresh blood into a concept (KYC) that had taken a beating related to concerns about privacy. So Congress passed a law that gave KYC the new name. Customer Identification simply sounds less invasive, even though as a procedure it amounts to the same thing.

It is also good to remind people that CIP, like KYC, is a part of a larger program to identify money laundering, terrorism, and other financial crimes. Even when we discuss the technicalities of our CIP program, everyone - including the trainer - should always keep the big picture in mind. The goal is to develop an understanding of who the customer is, what business they bring to the institution, and whether that business is legal.

Copyright © 2003 Compliance Action. Originally appeared in Compliance Action, Vol. 8, No. 13, 12/03