Due Diligence: KYC, AML & CFT checks in Singapore
Financial institutions in Singapore are highly regulated, as they have a responsibility to detect, deter, and prevent money laundering, terrorism financing, fraud, and other illicit activities. Thus, fund managers, financial advisers, insurance brokers, trust managers and payment service providers routinely require KYC, AML and CFT checks.
What is KYC, AML, and CFT?
- KYC – Know Your Customer
- AML – Anti-Money Laundering
- CFT – Combating the Financing of Terrorism
KYC refers to the process of verifying the identity of your customers, either before or during the time that they start doing business with you. The term “KYC” also references the regulated bank customer identity verification practices to assess and monitor customer risk. The KYC process is also a legal requirement intended as an anti-money laundering (AML) measure.
The importance of KYC
KYC is a standard business practice within the investment industry. It is also required during fundraising and M&A projects. The checks protect all stakeholders involved, and the business interests of companies, investment firms, and investors. Especially if there is a lot of money at stake. If a business or issuer complies with KYC policies, they will reduce the financial risks of their business arrangements with particular clients.
Many seasoned investors see KYC checks as a necessary process that builds trust and mitigates risk. Although these rigorous checks can be burdensome, they create a secure and trustworthy environment to enable financial or investment activities. It makes clients feel like they are working with a legitimate company.
What is involved in KYC checks?
The exact list of documents and background checks varies, depending on your client demographics, business-specific risk appetite, as well as expected volume. Minimally, it involves:
- Collection and verification of identification documents
- Companies: Certified Articles of Incorporation, and Government-issued Licenses
- Individuals: Passports (or acceptable equivalents)
- Screening of companies, groups, and individuals against the appropriate AML/CFT sanction lists via a reputable commercial database
- Checking against Politically Exposed Persons (“PEP”) names, lists, and their affiliates
- Determining the risk associated with the relevant individuals/groups/companies being investigated based on your internal parameters, as well as the results of the searches made
For more deals that involve larger sums of money or a higher level of risk, a more thorough check is needed. KYC service providers can be tasked to look into:
- The source of your clients’ income
- Your clients’ ability to invest in your market
- Your clients’ complete financial portfolio, credit profile, and background
At the end of a KYC check, you should receive reports, presented in relevant formats for record retention, audits and regulatory checks. It is a vital part of your risk management strategy to avoid business relationships with clients who have participated in shady or illegal activities.
Conducting KYC & AML checks with Lanturn
Our KYC & AML checks are broken into 2 tiers
- Basic – Information obtained to verify the identity of potential/existing clients, shareholders, and investors.
- Enhanced – This is for higher-risk customers, where a deeper understanding of the target individual/entity’s activities is needed to mitigate associated risks.
To understand the types of documents, and information that we will collect to execute the checks, please review our Compliance Services.
Due to the nature of our business, we currently do not cater to situations where the potential for money laundering or terrorist funding is low. If you have low-value accounts and a very high-volume, we recommend working with an e-KYC provider instead.
All our services includes:
- Collection and verification methods that comply with Data Protection regulations.
- A four-eyes quality check for all documents/information collected
- Secure digital record-keeping
Of course, the risk profile of your stakeholders has the potential to change over time. If you are subscribed to our “Outsourced Compliance Monitoring & Support” services, we will conduct KYC reviews of your shareholders and investors on a 6-monthly basis.
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