Business Management

KYC Due Diligence – Points to Pay Attention to

Financial systems, including KYC due diligence, use the principles of customer verification. This is necessary to avoid fraud and fight money laundering.

How to Conduct KYC Due Diligence?

It is quite difficult to conduct a competent KYC due diligence for an offshore company since the main source of the most reliable information about the company – state registers – in the case of offshore companies is only useful to a very small extent. Thus, the open state register of legal entities (which is constantly used by lawyers when conducting Due Diligence of an offshore company) of offshore jurisdictions contains information only about the name of the company, its registration number, date of registration, the state of the company and whether it has been liquidated.

KYC, or “Know Your Customer” practice (decryption of Know Your Customer) is a procedure for identifying counterparties that is mandatory for financial institutions, stock exchanges, bookmakers. If you do not use special tools, obtaining information about individuals and legal entities can take a long time, and the quality of the data obtained is not guaranteed. Information about the owners (shareholders) of the company, its officials (executive body), encumbrances, beneficiary-controller (beneficiary), assets, and other most important data that you need to pay attention to when conducting Due Diligence is not entered into state registers and state bodies offshore state is not known.

KYC is the principle of operation of financial institutions, which obliges them to identify the identity of a person before they can conduct transactions. This identification serves many purposes:

  • understanding your clientele;
  • monitoring operations;
  • reducing risks;
  • fighting bribery;
  • corruption.

But this does not mean that it is also impossible to carry out the KYC Due Diligence of an offshore company completely. Thus, information about the owners (shareholders), directors, encumbrances, the status and existence of the bankruptcy procedure is reported by the so-called. “registered agent”. A registered agent is a special private person whose activities are licensed and strictly regulated by the law of offshore jurisdiction.

When Is Enhanced Due Diligence Required?

The enhanced due diligence is a set of measures aimed at:

  • management of risks;
  • compliance with the requirements of regulators and legislation;
  • internal standards of the organization;
  • formation of relevant documents, reporting;
  • auditing and consulting.

The main goal of enhanced due diligence compliance is to control and eliminate financial and reputational losses of a bank or other financial organization that may arise as a result of the bank’s involvement in illegal activities. Thanks to this principle, the bank determines who can become its client, and can also obtain basic data about the client, track and evaluate its transactions, and increase the security of these transactions.

You can exchange shares for KYC due diligence services. You can then use this essentially free publicity and use it to let the world know that you are a public company. More people will know about you and more people will buy from you. This will help you in your quest to raise capital because more investors will know that your company’s shares are available for trading.

Regulation of access to objects (folders, files stored in the system) can also be based on authentication, but other algorithms are often used (the administrator defines rights and privileges for system participants, according to which they can either get acquainted with some objects, or, in addition to getting to know, make changes to them, or even delete them).