By Alon Gook, Head of Compliance and HR of Oracle Capital Group
KYC, or Know Your Customer, is a compliance practice undertaken when on-boarding each and every client at Oracle Capital Group. Whilst performing KYC is a time consuming process, Oracle does not take shortcuts since only through such practice it can ensure that both its business and its clients’ interests are protected.
Although the concept of KYC checks is not entirely new, it is only following the 9/11 terrorist attacks that advanced compliance practises were established by governments worldwide aimed at identifying current and future criminal financing activity, such as money laundering, financial fraud etc, which could be linked to terrorism.
As a result, all companies operating in the UK and abroad, but managed from the UK, now need to have a full understanding of the background of their business partners and clients. It has now become standard practice in the UK for regulated and, on occasion, for non-regulated companies to initially evaluate the risks of doing business with a potential client and verify his/her source of wealth, and, later, when the business relationship was established, to continue to monitor client’s activity and mitigate any fraudulent behaviour.
In the UK, any company that is subject to regulation either by the FCA or the HMRC must carry out KYC on every client that it deals with, even where a dealing comprises only a single stand-alone transaction. The aim of every due diligence check is to understand who the client actually is, if the company is called to act on behalf of a business, then to determine who actually owns and/or controls such business – specifically, to identify the Ultimate Beneficial Owner and obtain identification documents on him/her. This is crucial to ensure that all parties involved in the transaction are disclosed and known to the other parties. In addition, where the money in any transaction is received from a third party (for example, a third party company), such third party would need to undergo the KYC procedure.
A KYC may vary from case to case, but usually involves:
1. Passport check – verifying a client’s identity.
2. Proof of address (which may be a utility bill, bank statement, etc) – verifying a client’s place of residence in case the authorities need to be informed
3. CV and Source of Wealth – where the transaction involves large sums of money. Such additional checks may be necessary where a client with a low income approaches us wanting to buy a house worth 10 million pounds, we have to be suspicious and his/her background will require additional verification.
4. Professional references – in cases where a more in-depth KYC is necessary, and where we haven’t met a client personally. References can be given by certified professionals: Lawyers, Accountants, Doctors, Bankers, etc.
Where a company is acting as a client, the KYC process would include reviewing numerous additional documents. However, regardless of whether a client is a corporation or an individual, the goal of the KYC process remains the same – to identify who is the person actually entering into the transaction and to ensure that his/her money is legitimate.
Oracle Capital Goup understands that for many unfamiliar with the KYC procedure, the process may come off as off-putting and accusatory in nature. It is natural that clients may be confused by the necessity to provide extensive personal information to a service provider that they have chosen themselves. The fact is that KYCs should not be regarded as a cause for concern. This is simply an obligatory compliance procedure and all personal documents and information provided will remain confidential.
Although KYC is a legal obligation in the UK, we understand from experience that the process can sometimes be frustrating as the clients are faced with significant paperwork, this is why we do our best to educate and support clients through the process, to ensure that the procedure runs as smoothly as possible. Best practise is at the heart of everything Oracle does and we thank you for your patience in supporting us through this time-consuming, though important process.
