In the past, around 10 years earlier, company setup and bank account opening were a piece of cake, everything could be done within a week. Since 2014, customers started experiencing a hard time with bank account opening and the Know Your Customer (KYC) process became mandatory in all banking and financial institutes.
Background of Know Your Customer (KYC)
The main purpose of KYC is quite straightforward, mainly are:
Anti-Money Laundering (AML); and
Counter-Terrorist Financing;
While underlining, for detection of tax evasion corporations in a worldwide scale. To facilitate with, the OECD (Organisation for Economic Co-operation and Development) established a reporting standard for all country members to follow, which each country further develops their own due diligence requirements as a monitoring and recording mechanism.
What to monitor?
The scope of coverage is very clever, basically, all banks, financial institutes and any other related industry in relation to money transactions are required to adopt the standard, whereas nowadays it further extends the coverage to all trust or company service providers, which is the tools/vehicles providers of money transactions.
How to monitor?
Of course, the detail on how we operate to fulfil the KYC requirements are more complex, yet, we are pleased to share a little bit of its concept, which constitutes of three (3) parts:
Identification
The Corporate Structure - the entity is not considered independent, but only a part within the hierarchy;
Individuals behind the structure - despite the company itself, all ultimate owners are required to be identified;
Business activities involve - where the client needs to explain in detail all sorts of business activities (money transactions) involved in the business;
Verification
Organization Chart certified by the Director. If the structure is complicated, further corporate documents for verification purposes will be required;
Certified Passport and residential address proof (any letter / statement / document should be issued within 3 months) of individuals, certified bodies could be lawyers, notary public, government authorities, CPA, banks and other recognized financial institutes;
Business documents, such as company website, bank statements, agreements, contracts, corporate search reports … etc;
Maintains, records, judges and reports
Of course, if we detect any specious business activity, we have the obligation to report to law enforcement for further investigation;
Even nothing to report, we are required to maintain and record the KYC documents for law enforcement to access at any time;
Despite self-declaration, the customers need to provide relevant “proofs”, mainly documentation in the whole KYC process for record-keeping and that’s why it is more and more difficult for a start-up business to open a bank account and we can provide relevant assistance by interview the customer to see how you can deliver your own factual evidence for the bank to consider your application.
Hopefully, this article allows you a better understanding of why, and the rationale behind why we need to ask you more questions than before and take a longer period to set up a simple company for you. Anyhow, if we failed to comply and fulfil the KYC requirements, other than a heavy penalty, we will also be charged with obstruction of justice, and even a co-partner of the crime, therefore, this is essential for us to upkeep the standard.
For any additional information you would like to know, please feel free to drop us an email at catcherbiz@outlook.com. In addition, we dig out the below materials in case you need a little more insight.
OECD - Automatic Exchange of Information
HKMA – Account Opening
HKMA – Guideline on Anti-Money Laundering and Counter-Terrorist Financing
Guidelines – TCSP Licensee
HKMA – FAQ on Customer Due Diligence