KYC stands for "Know Your Customer." In simple words, a "client recognition method" that all banks, financial institutions, law firms, and real estate agents go through.
What is the procedure for carrying out the procedure?
To obtain additional information about the Client and to validate the information given, two approaches are used. The methods are as follows-
Information about the customer
When a potential client approaches the bank on a new matter, the following details about the client must be collected in order to determine who the client is:
Individuals
Identity and address are full. The following documents are commonly used to obtain this information:
- If the person is a resident of the UAE, they will need a passport or an Emirates Identity Card.
- Recent Utility Bill (Proof of Residence) – includes complete physical address, phone number, and other details.
Companies
The whole identity of the company (which includes name of the business, registration number or license number, business activity etc.), The firm's physical address, as well as complete information about the firm's Director(s) and Shareholder(s), as well as information about the person who is instructing the firm. The following documents are commonly used to obtain this information:
- Company Incorporation Documents—includes the company and/or trade name, registered or business address, date and place of incorporation or registration, corporate structure, and ultimate beneficial owner information.
- Names of all directors, partners, shareholders of the company or business/persons with executive authority, details on company structure, and respective shareholdings should be included in a copy of passports of individuals with executive authority.
Client Verification
Upon receiving the above details, the firm is required to take appropriate measures to verify the identity of the client and the individuals allowed to instruct on behalf of a corporate client/company via credible and independent sources (unless an exception applies).
Depending on the type of orders, the firm can also request additional details such as the client's name, the source of funds, and so on.
What is the purpose of the KYC procedure?
- Before taking on a new client, it's important for the Banks to recognize and validate who that client is.
- To allow the Bank to understand and know their client's dealings in order to efficiently carry out their instructions
- To follow all applicable laws and administrative guidelines.
- To discourage criminals from using the company to launder money and to report any suspicious or illegal activity in compliance with the law.