By Iva Karen
KUALA LUMPUR, June 10 — Know Your Customer (KYC) best practices are becoming more important in retaining the integrity of Malaysia’s financial system as digital transactions grow and risks evolve, says anti-money laundering and counter-financing of terrorism expert Muhamad Nazri Shaidon.
He said KYC is no longer just about checking identity documents when a customer signs up. It is now an ongoing process to assess customer risk and behaviour to prevent financial crimes.
“KYC is a continuous process. It helps institutions detect suspicious activity and protect the financial system,” said Muhamad Nazri, who has nearly 10 years of experience at Bank Negara Malaysia’s Financial Intelligence and Enforcement Department.
He pointed out that KYC procedures start with verifying identity documents like MyKad or passports, followed by biometric checks such as facial recognition or fingerprint scans, especially for digital onboarding.
He also said that the financial institutions also screen customers against watchlists from the Home Ministry, United Nations, and international bodies like the Office of Foreign Assets Control (OFAC).
He further said that under the guidelines from BNM, a Risk-Based Approach (RBA) is used to classify customers as low, medium, or high risk based on factors such as job, income, nationality, and transaction patterns.
“For companies, a similar process called Know Your Business (KYB) is used. This includes verifying business registration with the Companies Commission of Malaysia (SSM), identifying business owners, and checking if the business operates in high-risk sectors like cryptocurrency or gambling.
“High-risk individuals or businesses go through Enhanced Due Diligence (EDD), which may involve additional document checks and closer monitoring of transactions,” he said.
He stressed that the institutions must also carry out Ongoing Due Diligence (ODD) to regularly update risk profiles and watch for unusual activity.
“Risks can change over time. A customer who is low risk today may become high risk in the future,” he added.
Muhamad Nazri stressed that KYC is not only a legal requirement, but also a strategic step to build trust, reduce fraud, and protect Malaysia’s economy.
–WE