New Blog Article

The 21st century challenge of client PSC & UBO identity verification


POSTED ON JUNE 7, 2017 BY ISIGNTHIS

07
Jun
Whilst innovation in consumer facing Fintech is occurring constantly, the same cannot unfortunately be said for innovation in AML obligated firms, such as Law firms, auditors and Payment Service Providers (PSPs) back office AML/CFT systems.
An area that continues to frustrate progress is the due diligence associated with client or merchant on-boarding by AML obligated firms. This is especially the case in the verification of key controllers, consisting of Ultimate Beneficial Owners (UBOs) and Persons of Significant Control (PSC) such as directors, officers, and other stakeholders.
Anti-Money Laundering regulations require AML obligated entities to not only identify but also to verify their customers. This includes PSC and UBOs of entities that participate in the delivery chain of AML regulated services.
The EC’s Fourth Directive mandates the following customer due diligence measures for PSPs:
(1) identifying and verifying the customer’s identity based on data from a “reliable and independent source,”
(2) identifying the beneficial owner and “taking reasonable measures to verify his identity,”
(3) assessing and obtaining information on the “purpose and intended nature of the business relationship” and
(4) conducting ongoing monitoring of the business relationship to ensure transactions are consistent with knowledge of the customer’s “business and risk profile” and ensuring that data maintained is kept up-to-date.
Online Information from Companies Registrar
Australia and the UK already have registers identifying the PSC of companies. The introduction of an EU wide UBO register provides the basis for identifying UBOs and PSC of EU entities, including merchants, corporates, trusts, clubs and associations. Once a person is identified, the AML obligated firm must then verify the person’s identity, completing the regulatory requirement to identify and verify the person.
Up until now, AML obligated firms have had one of two options to verify key controllers of their clients or merchants, being by either face to face interview, or by requesting the person to have their identity documents certified, posted and then processed manually by the AML obligated entity. Both of these options cause significant time delays and frustration for those having to perform Know Your Customer (KYC) due diligence, as well as for the client and their UBO’s and PSC’s.
Appointment Setting for Face to Face
Whilst face to face checks will continue to be part of the on-boarding process for client officers, it is unlikely that the client entity will be able to easily arrange for all their key controllers, especially their UBOs, to attend a face to face KYC process with a representative from the AML obligated firm. The ‘appointment setting’, attendance, follow up, and manual process thus becomes extremely challenging, time consuming and expensive for all parties.
Certifying Documents, yet another (but different) appointment to attend
The use of certified documents is still predominant, and it is usually performed in conjunction with comparing some of the PSC’s information to a government regulated database, such as a credit reference agency or an electoral roll. For AML obligated entity’s, this option provides the reach face to face can’t, but the challenge is that it can take days, and if not weeks, to encourage the PSC to set an appointment with a lawyer or notary get their documents certified. The AML obligated entity must then still wait to receive them in the post, before their back office can manually check the application.
Furthermore, it’s usual that the PSC’s are unable to complete the process in any timely manner, as there are the usual issues of travel, holidays, being domiciled overseas, documents not being available, together with the time, effort and cost associated with arranging for the certification of documents by the person – and the hassle of attending yet another appointment!
Paydentity Console by iSignthis
Paydentity® Console offers AML obligated firms a fast and efficient way to verify UBOs and the PSC of entities. Whilst many third-party providers can identify the legal structures and UBOs of entities, the verification of the individuals behind them is often time consuming, slow and costly. The automation behind Paydentity Console leads to significantly faster and simplified remote on-boarding of the person behind the entity, taking only 3 to 5 minutes of remote participation at a time convenient to the person being identified.
For more information about our PSC & UBO identity verification services, please contact [email protected].