KYC

What it means

KYC is the process of knowing your client: verifying identity, establishing the ownership chain and the ultimate beneficial owner, understanding the business, and assessing the risk of the relationship.

It is not a one-off act at signature. Ongoing monitoring is part of it - the relationship is reassessed when the owner, the activity or the pattern of transactions changes.

KYC gets confused with due diligence when buying a company. The first is a mandatory process for every client, scaled to risk; the second a voluntary in-depth review before a deal - of finances, contracts, disputes. KYC answers who I am dealing with, due diligence answers what I am buying.

How it works in practice

On taking a client on we ask for the statutory representative’s ID, a register extract, the ownership chain down to natural persons, and a short description of the business and its main partners. The depth follows the risk.

Sanctions screening and politically exposed person checks complete the picture. The records are kept for the statutory period, including after the relationship ends.

During the relationship KYC comes back with every material change: a new member, a new managing director, payments from unexpected countries. On a transfer of a business share we ask for the updated ownership structure and the new beneficial owner’s details before the next monthly processing.

What to watch out for

Incomplete KYC means an obliged entity under AML may not enter the relationship or must end it. For the client that is a practical problem: without an evidenced structure a bank will not open an account and an accounting firm will not sign - so the papers are prepared in advance, not after a refusal.

Often the beneficial owner shown in the Commercial Register no longer matches reality because it was not updated after a change of owner. An obliged entity may not overlook such a gap, so the engagement or the account opening waits until the entry is corrected, which can take weeks.