What Due Diligence Checks are Mandatory in the UK?

Posted on July 18, 2022
Written by Clare Puplett

due diligence

If a business is covered by Money Laundering Regulations, it has a responsibility to meet certain day-to-day criteria. These include Customer Due Diligence (CDD) measures to ensure that customers are who they say they are.  

The business must evidence that they have taken appropriate steps to identify customers, (name, official photograph, residential address and date of birth) and they have internal controls for ongoing monitoring to ensure the customer continues to meet Anti-Money Laundering (AML) requirements. In some cases, businesses must also identify the ‘beneficial owner’.

What Customer Due Diligence Measures are Required for KYC?

A business must apply Know Your Customer CDD measures:

  • When establishing a business relationship with a customer 
  • If they suspect money laundering or terrorist financing has/will occur
  • If there are doubts about a customer’s identification that was previously supplied, or if their circumstances have changed
  • If the business is not a high value dealer, but carries out an ‘occasional transaction’ worth €15,000 or more

Specific AML requirements for KYC include:  

  • Valid proof of identity (name and photograph)
  • Proof of current residential address
  • Complex company structures
  • Politically Exposed Persons (PEPs) andSanctions checks
  • Source of wealth

What Customer Due Diligence Measures are Required for KYB?

CDD measures for Know Your Business are required in order to ascertain the purpose of the relationship, and the intended nature of the relationship – for example where funds will come from. 

The type of information that businesses need to obtain may include:

  • Details of the customer’s business or employment including documentation for companies
  • The source and origin of funds that the customer will be using 
  • Copies of recent and current financial statements
  • Details of the relationships between signatories and any underlying beneficial owners
  • The expected level and type of activity that will take place 
  • People with Significant Control (PSC)

Ongoing KYC/KYB Monitoring Against ‘Bad Actors’

Businesses need to keep up-to-date information and amend their risk assessment of a particular customer if their circumstances change. This may include an increase in the level or type of business activity, or a change in the ownership structure of the business. Further due diligence measures must be carried out where appropriate such as monitoring against Politically Exposed Persons (PEPs) and sanctions changes.

6AMLD ushered in a far more stringent and targeted regime for tackling money laundering and allied activities. Businesses aren’t responsible for stopping all cases of fraud but instead, the regulators want to see they have measures in place to identify any potential cases, and that there is due process. Companies and individual company officers are now directly (and personally) responsible for any failings within their organisation and may face sanctions such as fines, or even imprisonment for failing in their compliance responsibilities. 

How can your business achieve KYC/KYB compliance effectively?

  • Digital Identity (ID&V): ID&V is fundamental in order to establish that the customer is who they say they are and the same goes for ensuring new employees have the legal right to work in the UK. With the support of a digital onboarding solution, providing immediate access to multiple national and international databases, companies can provide a seamless and immediate response to applications, whilst more in-depth checks are being made elsewhere within the system for easier KYC and KYB requirements.
  • Documentation Validation: Identity document validation can now be carried out remotely. Digital platforms, such as WorkStation from NorthRow, offer access to global data that can validate identity documents from the majority of countries worldwide, including passports, visas, driving licences and National ID cards, amongst others. Applicants simply need to have access to a smartphone and/or the internet and to have the documents with them. 
  • Liveness Checks: The latest technologies use a range of biometric techniques to determine if the person being checked is ‘Live’. With access to a smartphone or computer camera, the customer can be checked for facial recognition, lip-syncing and liveness verification, alongside other anti-spoofing technologies to provide instant verification from anywhere.
  • Remote Verification: ‘Real-time’ verification is important in our ‘always on’ society, so it is essential to be able to verify new customers remotely. Verification can be performed at a time, and in a location that is most convenient to them.
  • PEPs and Sanctions: Whether KYC or KYB onboarding, it is equally important to check customers against PEPs and Sanctions registers, alongside that latest adverse media There are people with whom it may be legal to do business with, but that you do not wish to do business with.
  • Ultimate Beneficial Owners (UBOs ) for KYB Onboarding: In tandem with PEPs and Sanctions checking, there is the need to be able to identify those who are the ultimate beneficial owners of any companies that you may be looking to do business with. An ultimate beneficial owner may not be obvious, without detailed investigation, as they may have full or partial control of a company anonymously, often through shell companies. Identifying UBOs is one of the most complex issues facing regulated entities and the support provided by having access to the digital data provided through AML software providers, is essential to ensuring that you do not fall foul of professional criminals.

Delivering Mandatory KYC and KYB Simply

NorthRow provides KYB/KYC and ID&V software, through our single API solution, that additionally provides Right to Work onboarding; remote verification, through our RemoteVerify product; alongside long-term monitoring and remediation, to ensure that changes to customer circumstances are identified and resolved.