What is Corporate KYC?
Corporate KYC (Know Your Customer) is a process of verifying the identity of business clients, and corporate clients that include companies, partnerships, and other legal entities. The main purpose of Corporate KYC is to ensure the legal compliance of firms and the prevention of money laundering.
Importance of Corporate KYC
Corporate KYC is an important requirement imposed by regulatory authorities like FATF. many countries regulate Corporate KYC with a self-regulatory mechanism. But the guidelines and purpose remain the same. Globally, it is essential for financial institutions and banks to ensure their compliance with updated knowledge and guidelines on KYC and AML procedures.
How Corporate KYC and Know Your Business (KYB) are interlinked?
Corporate KYC and KYB (Know Your Business) are interlinked in the way that both refer to the verification of identity in business transactions. They both deal with business information and corporate clients. While corporate KYC is focused on the ownership structure of the company, KYB (Know Your Business) is a deeper concept. It verifies the ownership structure, directors, and key personnel in the company.
Key Difference between Corporate KYC and KYB
Basically, corporate KYC and KYB are different due to the level of due diligence and risk factors. Also, the elements are a bit different. In Corporate KYC, the customers and clients are verified individually as a person. In KYB, the businesses having other businesses as clients are verified.
Challenges faced in Corporate KYC
The following are the main challenges faced:
- Poor Data
As firms collect large amounts of data for corporate KYC can have discrepancies and inconsistencies in corporate registries for KYC. Also, during filing the history of the firm, verification of customer’s information might be outdated.
- False Positives
Industries bear a high cost due to false positives while conducting Corporate KYC. These false positives can compromise a firm’s compliance with KYC AML regulations in real-time. Strict penalties can be faced in case of failure to remove false positives.
- Time-Consuming
Manual KYC takes more time than Digital KYC. In corporate KYC, the firm needs to verify each client before onboarding and the time taken might result in losing a potential client. In other words, the business client might feel agitated and may choose not to onboard.
- Continuous Monitoring
Another challenge is continuous monitoring. Firm ownership and business interest change over time. Therefore, regulators and compliance require updated information about these factors.
Corporate KYC Documents
Following here is a comprehensive yet not exhaustive list of KYC documents required in the corporate sector:
- Certificate of incorporation
- Articles of association
- Memorandum of association
- Business license or permit
- Tax identification number (TIN)
- Financial statements (such as balance sheets, income statements, and cash flow statements)
- Bank statements
- Board resolution authorizing the account opening and signatories
- Ultimate Beneficial Ownership (UBO) information
- Proof of identity and address of directors, authorized signatories, and UBOs
- Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) policies and procedures
- Source of funds and wealth declaration
- Risk assessment of the company and its activities.
This list may add or subtract a few documents based on the country and jurisdiction. Also, the regulatory compliance authorities might change or update these required documents list according to the threat levels of Money Laundering.
Final Word
Overall, Corporate KYC is imperative for firms operating in fast-paced corporate environments. Also, regulated firms need to stay updated about the latest requirements in the regulatory framework of KYC / AML. For this purpose, KYC AML Guide is committed to providing the updated comparative information among the industry players and aims towards facilitating compliance for the corporate sector.