KYC Is Outdated. It’s Time for Know-Your-Counterparty (KYCp)

We really should rename KYC from Know-Your-Customer to Know-Your-Counterparty.

Until now, various KYC software suppliers have used KYB (Know-Your-Business) to cater to use cases that go beyond knowing your customers.

But one should think that customers are your business as well?

Obviously, KYB could also cover any due diligence on legal entities, and KYC could cover due diligence on private individuals.

However, most companies also have customers who are legal entities, so this is not perfect either.

The problem is that the number of use cases for KYC has exploded over recent years, making Know-Your-Customer a rather slim way of describing a broad range of examples of KYC collection and screening.

To mention a few use cases we see in Avallone:

✅ A production company collecting KYC from their corporate customers across the world.

✅ A private equity fund collecting KYC from its investors.

✅ A CO2 emissions certificate firm collecting KYC from regenerative farmers across Europe.

✅ A law firm collecting KYC from clients in their various cases and screening the opposing party of the case.

✅ A private fund collecting KYC on all of its investment targets once they reach a certain point in the investment process.

✅ A production company collecting KYC from their distributors globally.

✅ A fertilizer company collecting KYC on vendors and customers.

✅ A global NGO/charity collecting KYC on the banks they use to distribute funds to people in need.

Looking at the examples above, it becomes clear that KYC is so much more than Know-Your-Customer - and it should be, as the global risk landscape continues to evolve and companies become increasingly aware of the compliance and reputation risks they have to mitigate.

On that note - half of our customers are not regulated. Then why bother collecting KYC and performing screening at all? The answer is to protect against reputation risks and non-compliance related to sanctions breaches. When it comes to sanctions, everyone is regulated, after all.

I know I sound like an old compliance officer trying to convince the business to do more (or a KYC software CEO trying to sell more), but being really great at KYC and sanctions screening is a competitive advantage these days.

Funds that are super good at screening their investment targets will attract more funding because investors do not want to support financial crime.

Blue-chip corporations are more inclined to buy CO2 emissions certificates when they are sure the money will not be used in a money laundering scheme.

Law firms with a super tight process when collecting KYC from their clients just get more clients, as everyone hates KYC and just wants it to be fast and painless. The list goes on.

Now you know why we talk so much about counterparties at Avallone.