KYC procedure — modern requirements.
Some 20 years ago, only a few people heard about the “know your client” procedure, and Due Diligence was known only to lawyers involved in mergers and acquisitions. Today, the situation has changed and absolutely everyone who runs a business or even just has a bank account faces these procedures.
In this article we will look at the KYC procedure and the specifics of its application from the perspective of regulated institutions in Cyprus, but we are convinced that these procedures are becoming as universal as possible and the article can be applied to any jurisdiction.
The KYC procedure is faced by all residents and guests of the island who want to open a business in Cyprus or a Cyprus bank account. Traditionally, three main documents have always been requested for the KYC procedure:
an identity document (usually a passport);
a document certifying the address of residence (usually a fresh utility bill);
a document certifying professional qualifications (resume).
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KYC Check to Prevent Frauds.
Even 5 years ago, this list would have been enough to open a bank account, register a company, buy real estate. These days, this list is still mandatory, but it does not even reach the minimum necessary. Due to the ongoing fight against money laundering and terrorist financing, as well as some geopolitical trends, banks and other regulated institutions are required not only to have basic information about the client, but also to know everything about him, down to the smallest details of his financial situation, including sources of wealth.
Today, in order to pass the KYC procedure, the client must be ready to provide, in addition to the basic package above, also:
a letter of recommendation from a regulated organization (e.g. from a bank, auditor, lawyer), as well
as information and supporting documents about his assets, funds and their source of origin.
Moreover, since the KYC procedure is part of the system for combating tax evasion, at the moment regulated institutions, in particular banks, request not only information about their client's assets and income, but also confirmation that the client has paid taxes from such income. Usually such confirmation is a tax return of an individual, but sometimes banks accept other documents.
It should be noted here that the list presented is minimal and the compliance specialist of the regulated company may request additional documents and information if it is impossible to draw an unambiguous conclusion about the client's reliability from the data provided by the client.
