KYC

KYC stands for "know your customer" and covers the necessary actions a company needs to take to verify a customer's identity and assess their risk to the business.

KYC is a great asset in anti-money laundering as it helps to ensure that the company has carried out the necessary processes - including knowing who the customer is and, not least, having conducted an active risk assessment of the customer.

The Money Laundering Act applies to persons and companies engaged in business activities where there is an inherent risk of their business activity being used for money laundering. This means that the Money Laundering Act applies to: lenders, leasing companies, certain types of rental companies, art dealers, real estate agents, accountants, tax advisors, lawyers and many more.

In order to comply with the provisions of the Anti-Money Laundering Act, companies covered by the law cannot avoid having a good KYC setup.

A large part of KYC is regulated by the Act on Measures to Prevent Money Laundering and Terrorist Financing - also known as the Money Laundering Act.

What does KYC consist of?

KYC consists of obtaining relevant identification information on the customer, regardless of whether they are business or private customers. When obtaining information about a company, it is also important to identify the underlying owners and stakeholders (Section 30 of the Danish Money Laundering Act).

One way of obtaining identification information is for the company to request that the customer's identification documents be sent to them. In Denmark, a driver's license and/or passport is often sufficient.

The process will often consist of comparing a range of information - for example, retrieving information from reliable sources such as the CVR register and the CPR register.

Basically, the documents and information obtained about the customer should always match their risk level. If the risk level of the customer is high, more and additional information is often required - than if the risk level and customer engagement was low.

In addition to collecting personal and company information, the company must also perform a risk assessment of the customer. Among other things, the company must obtain information about whether the customer is on the Politically Exposed Persons (PEP) list or whether the customer's other circumstances give reason to suspect that the person is connected to money laundering or terrorist financing. It could also be the customer's use of the company's product that increased the risk - for example, large amounts of cash, etc.

How the company conducts their KYC, the scope of the process and whether it should be continuously expanded in line with the company's activities is the responsibility of the company itself.

In banks and credit companies, this is typically done in close collaboration with AML employees/teams - AML stands for Anti Money Laundering, and is the team that fights money laundering.

Storage of information

Information, documents and registrations made in connection with maintaining the requirements of the Anti-Money Laundering Act must be kept for at least 5 years after the business relationship has ended - or at the completion of the last transaction.

Read more about this in section 30 of the Money Laundering Act.

KYC can be cost-effective - even if you are not covered by the Money Laundering Act

Even if your company is not covered by the Money Laundering Act and therefore does not necessarily have to follow the stricter requirements, including KYC, there may actually be good economy in performing a KYC process on your customers anyway.

Because KYC ensures that you always have the correct information on your customers; where do they live, what is their full name, has the company changed owners etc.

In this way, KYC can help ensure that you always have knowledge of your customers - and thus help ensure that you do not send goods to the wrong address if the customer has moved, for example - or that you can physically send invoices to the right ones.

Get help with KYC at Qatchr

Hos Qatchr har vi udviklet en platform, der gør det nemt for dig at arbejde med KYC og kredittjek.

We have a platform that can help you with the statutory processes around KYC - and give you a product that gives you more insight than similar KYC platforms.

Try us today.