Top five KYC data points your bank needs

No matter the bank or its region, when they are collecting KYC information, there are always specific pieces of data that they will want to see.

And if you're prepared with this knowledge, then your response and its processing can be that much faster and easier.
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Why are banks so keen on KYC requirements?‍

Banks and financial institutions around the world are all subject to the many and various
strict and comprehensive legal requirements -to collect KYC information to make sure that criminals do not misuse the financial system for money laundering and other financial crime related activities.

Banks want to protect their reputation at all costs. History has shown that being involved in money laundering has a detrimental effect on a bank’s reputation.

Most banks and bankers are decent people and do not want to be part of laundering money that comes from terrible crimes such as extortion, drug trafficking, illegal arms trading and human trafficking.
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So what are the 5 basic data points that banks collect as part of KYC?
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1. IDENTIFICATION
The bank needs to be sure they are conducting business with the right counterparty, just like you as a person identify yourself with a passport or a national identity card. The bank will ask the company for all the information needed to make that identification.

This is often the easy part of the process, since it is mostly about documenting the company’s incorporation. The banks typically don't pull the information themselves from the public register, since they want companies to deliver the latest, most up-to-date information and confirm its validity themselves.
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2. BUSINESS MODEL AND PURPOSE OF THE RELATIONSHIP
An essential part of KYC is understanding a customer’s business model. It helps banks to understand the risk of your business model and assess if the use of their products and services is valid.

Banks are obligated to assess all customers’ risks and adjust their own risk setup according to the customer risk. This is to ensure banks are using the needed resources to identify potential money laundering and terrorist financing risks.

Often companies do not use enough time to explain their business model to the banks.  However, you are the most reliable source of a clear and correct description of your business model. With a little effort, you will avoid many ongoing questions from the bank regarding your use of the bank’s services and products.
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3. OWNERSHIP AND CONTROL
There is an increasing (regulatory) request for transparency when it comes to the ownership and control structure of companies. The goal is that Ultimate Beneficial Owners (the individuals who actually own or control the company, UBOs) should not hide behind complex company structures and shell companies.

It can be difficult for companies to have complete oversight of owners and voting rights, since they also have to consider indirect ownership and control. But they should always have an updated ownership and control structure illustration. Banks will often ask for an illustration to visualize and better understand the structure.

Once this is in place comes another cumbersome part of the process, which is collecting relevant information and documentation from the various Company Officers, being the UBOs from the ownership and control structure, along with the board and executive members of the company.

If you’re located in the EU, you are required to proactively share information about changes in your Beneficial Owners. You are also legally responsible for the correctness of the information you share with the banks.

Unfortunately, many companies do not have updated ownership and control information ready. This can be a delaying factor when it comes to the KYC process.
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4. INTENDED USE
Banks are required to understand the customer’s use of their products and services and need to make sure that it aligns with the company’s business model. In addition to that requirement, they must monitor their business to make sure that the customer is using the products as expected. This is to identify unusual use of the products, such as transactions that are not according to expected behavior.

To perform this monitoring, banks need relevant information that can be used to monitor deviations from the expected behavior.

If you do not deliver realistic information about your intended use of the bank’s products, you will experience that banks often come back and ask specific questions about transactions. They do that since they did not expect these transactions and need to understand the reason for them.

When companies do not give realistic information about their expectations, that makes future cooperation more time-consuming for both parties. The better information you deliver regarding your business model and your expected use of the bank, the fewer follow-up questions you will receive.
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5. TAX INFORMATION
As a part of the KYC process, you are often asked to deliver tax information. The request is mainly related to FATCA (US tax regulation) and CRS (EU’s Common Reporting Standard) and ensures that banks can share relevant tax information across countries.
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In summary‍

Banks aren’t asking for KYC information to annoy you or waste your time, although it can often feel that way.

But armed with this insight, you can be prepared and have all the right pieces of information systematically organized, so you can quickly provide complete and correct information to the bank.

With this, you'll avoid unneeded interactions and save time for everyone - most importantly, yourself.
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Can technology help?

‍Absolutely. The Avallone platform lets you automate all of the information and documentation gathering, structuring and sharing with your financial institutions and other counterparties / third parties, so you can focus on your core business.

Contact us for a demo with one of our KYC experts
so you can see how responding to KYC can be fast and painless.