So far, we have strived to bring in authentic information about KYC and AML. Previously, we have discussed in detail the process of KYC/AML and its implications in different aspects. Today we shall discuss an important notion of KYC requirements for corporate firms.
Who are the corporate actors?
Corporate Actors are defined as the members of a formal organization who are directly involved in the decision-making process and have a real membership. They often pose to represent the interest of their organization, but in reality, they might also misrepresent these interests. Also, they may be involved in personal agendas and can pursue their independent interests. Apparently, their decisions will result in the formation of rule regimes. Fulfilling these requirements is mandatory for everyone in the system at different levels. Non-compliance to KYC/AML results in heavy sanctions and fines. Regardless of these notions, there are multiple corporate actors who are non-compliant with KYC & AML.
Corrupt Corporate Actors
It is not that all corporate players are non-compliant. Specifically, the corrupt ones try to outwit the system. They do it to carry out their illicit activities. Moreover, their dirty money remains in circulation through Money Laundering and cannot be tracked. Still, many legal and compliant corporate actors feel reluctant to fulfill the KYC requirements. Research shows that 32% of corporate actors have security and trust issues during the KYC process.
Link to the AML process
Anti-Money Laundering (AML) is one of the main motives of the KYC process. Non-compliance to AML means involvement in Money Laundering or unawareness of the compliance regulations. Similarly, statistics show that last year $7.7 billion of fines were imposed on globally recognized entities for poor KYC/AML processes.
Risks to non-compliance with KYC/AML
Mainly, the risk of fraud and money laundering is a serious threat to the system. But for the corporate actors, there is serious danger of legal action against them. It can be arrests, punishments, fines and imprisonment too. These are all the risks of non-compliance with KYC/AML. Thus, to get the KYC/AML rightly done, one needs to know and fulfill the KYC requirements.
How the corrupt corporate actors have outwitted the system
Recently, many incidents of fraud and money laundering have proved that there are loopholes in the present KYC/AML system. Below is just a sneak peek of what’s happening in reality:
- In the period 2017-2018, fiscal losses topped $ 400 million due to fraud alone.
- Out of 3 million fraud cases, 15% were identity theft. Previously, identity theft decreased from 2015-2018.
- This proves that manual KYC is not enough for foolproof security.
Issues faced by the corporate actors in KYC
Consequently, the complex system and unawareness of the system make it difficult for corporate actors to stay compliant. As a result of which, they try to bypass the system even if they are not criminals. Below is the chart that shows the main reasons why they are unwilling to fulfill the KYC requirements.
In Summary, the issues faced by corporate firms are justified. Hence, the KYC and AML system needs to improve and become more seamless. Proactively, eKYC has resolved many of these issues for many corporate actors. Therefore, corporate firms are now preferring to shift to eKYC and explore digital solutions toward compliance.
What are the basic KYC requirements?
Knowingly, the KYC has main requirements listed below:
- ID card verification
- Face Verification
- Biometric Verification
- Document Verification
The main documents required for this verification are a passport, driving license and utility bill.
KYC documents for corporate actors in the UK
Firstly, In the UK, corporations need to have a copy of the Certificate of Incorporation. This Certificate comes directly from the company's house. Alternatively, the original certificate of incorporation might be required or a copy of it. Moreover, read the following list of documents as KYC requirements for non-UK firms.
- Officially approved evidence of a registered address
- Certificate of Incorporation
- A legitimate duplicate of the mandatory papers encompassing the establishment and name alteration of a firm, such as the Memorandum and Articles of Association.
- Certificate of Good Standing. Alternatively, the Legal Validity from a qualified lawyer.
- Certified Register of Shareholders
- Certified Register of Members
- Certified Register of Directors
Requirements of Reports and Accounts
Primarily, the corporate actors (firms) operating for more than 18 months must provide a copy of updated reports and accounts. Also, these shall be audited where required by the regulators in the UK. Moreover, if the UBO (Ultimate Beneficial Ownership) is through a series of entities, it is mandatory to submit documentary evidence.
Identification of KYC Requirements for owners or controllers
Mainly, 2 documents are required for the identification of real-life persons who control the business entity.
- Proof of Identity
- A full UK or foreign passport that has the Machine-readable zone
- A full UK or foreign photo card driving license
- A photo card national identity card that has the Machine-readable zone
- Proof of address
- A UK photo card driving license with the residential address (if not already used for ID proof).
- Bank credit card or statement from a UK or foreign bank (within the last 3 months, not from the internet).
- A UK mortgage statement from the last 12 months (not from the internet).
- Current year's UK council tax bill.
- Utility company letter/bill (less than 3 months old, except water bills which must be current). Confirms service and cannot be from the internet; mobile phone bills not accepted.
- A UK TV license letter or Direct Debit schedule (less than 12 months old) confirming name, address, and license.
- Voters roll search.
Furthermore, it is important for the corporate actors that the following people are allowed to certify the documents:
- Home England employees - Only for UK-issued documents and only when the original is sighted.
- A qualified lawyer or attorney - registered with the national professional body.
- A qualified accountant registered with the relevant national professional body.’
- A notary publisher, a member of the judiciary or a senior civil servant
- A serving police officer
- Designated senior staff of a bank
- British Embassy consulate or a high commission officer
- A licensed conveyancer
- An employee of the UK Post Office
- Legal Executive registered with the chartered institute.
Overall, the KYC requirements are necessary for compliance with AML. Corporate actors should stay compliant with the legal requirements in order to avoid serious legal actions. Ultimately, it will protect their own end and help them grow legally. Since there are no shortcuts in life and business owners should avoid Fincrime at all times. Otherwise, the regulators are bound to hold them accountable and find the money launderers. If the illicit money trails link back to criminal activity, they might also get punished severely. So, to avoid all this, compliance with KYC and AML is not only beneficial but also a secure approach toward regulating your business. Also, eKYC and blockchain have helped customers and other users to get their KYC done seamlessly.