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Advantages of KYC for Singapore Companies
Technology and the Internet have made our lives easier and more connected, making it possible to transfer cross-border funds in seconds or do business with anyone around the world. But this convenience also opens the door to criminal behaviour like online fraud, identity theft, and money laundering.
According to the United Nations (UN), the amount of money laundered globally in any given year ranges between
Singapore has long been regarded as one of the most forward-thinking nations regarding tech innovations. It's often one of the first nations globally to have clear laws and regulations regarding something new, like embracing the cryptocurrency space.
Such a stance is one of the reasons why businesses and investors flock to the Merlion city, as evidenced by Singapore's assets under management (AUM) that keep increasing. In 2020, its AUM ballooned to
Remember that these laws are implemented to ensure the security of Singapore's financial institutions, investors, businesses, and the overall economy. By doing so, it keeps its place as a premier financial hub worldwide. All laws are implemented and released by the Money Authority of Singapore (MAS), which plays a supervisory and regulatory role, ensuring that all financial activities in Singapore are legitimate and not for money laundering or terrorism purposes.
One way of ensuring this is by complying with regulations like
One of these controls is the KYC or Know Your Customer stage.
The Definition of Know Your Customer (KYC)
The KYC process is non-negotiable, meaning it is something that every investor has to go through. As the name implies, KYC refers to a set of processes to prove that the customer exists and their source of income is legitimate. This is necessary since financial institutions are more vulnerable than ever to illicit criminal activities in today’s global economy.
Consider this: would you ever serve a customer wearing a hoodie and a mask who walks into a physical bank branch? You would be reluctant and insist on seeing their face and particulars. Failure to do so will result in the denial of service or a call to the authorities.
Such an analogy demonstrates the function of KYC. Ultimately, it establishes a level of trust between both the customer and the service provider. It can be said that the KYC process is the first line of defence for service providers against criminal activities.
The Importance and Advantages of KYC
1. Authenticate the customers’ identity
Financial institutions and service providers are created to serve hundreds to millions of customers daily. They are a prime target for cybercriminals, accessing money and other financial instruments for their own gain, like funding their illicit activities by taking over an existing account or creating a new one under disguise. Doing so is easier than ever, especially with the advancements in technology. Therefore, these service providers must remain vigilant by implementing KYC practices.
The KYC process allows you to verify that the customer does exist and plans to put their legitimate earnings in the capital market for an investment goal, for example. The money is not earned through bribery or other illegal activities, such as drug trafficking.
2. Minimise the possibility of misuse
The KYC process is an effort by the service provider to find out everything there is to know about the potential user or investor before they are granted access to enjoy the service offered. This includes running a background check on them, their financial history and owned assets. Essentially, producing a brief that consists of their track record in society. This lets you assess the risk of a potential customer misusing your service, which may have dire consequences for the general public.
Think of it this way, if you are a bank owner, would you let your bank be used as a place where extremist terrorists transfer their funds to execute their plans? Most likely, you would not want to take the chance. Not only will you deal with the relevant authorities, but your reputation, which takes years to build, will be tainted instantly.
3. It builds trust
As mentioned above, KYC is a way to establish trust between the involved parties: the service provider and the customer. The service provider proves to the customer that their business is legal and security of their kept funds and services is a top priority. Meanwhile, the customer proves to the service provider that their source of income and intentions are proper and not for some nefarious means.
Doing so establishes that the business and possibly the region as a whole is secure, which may attract more investors down the line, boosting the economy in the process. Put your customer’s shoes on, and ask yourself, “Would I invest here?”. Surely, you want to invest in a place that complies with the law and has a robust economic landscape.
Requirements of KYC in Singapore and How it is Done
KYC in Singapore is a two-way street, meaning it is not only the investor that must go through it but also the financial services that are incorporated here. To pass the KYC process with flying colours, registered entities must show the following to their KYC service provider:
Full Name, Identification Proof (such as Identity Card or Passport), Residential Address, Date of Birth and Nationality of each of the Directors, Shareholders, and the ultimate Beneficial Owners of the company.
A resolution by the company’s certificate of incorporation
Copy of the company’s Memorandum and Articles Association (M&AA)
Copy of the company’s business profile
Copy of the company’s certificate of incorporation.
The following background checks will be conducted on yourself and persons acting on your behalf:
Source of income or revenue
Nature and purpose of your accounts, or linked accounts
Country of origin and residence
The following assessment will also be done:
If it is easy to contact your existing clients
If you or your clients are Politically Exposed Persons (PEPs), like politicians or relatives thereof
If you are secretive and is avoiding face to face meetings
There are unusual transactions in your bank accounts
You company structure is not normal
Your service provider can conduct KYC can in two ways: in-person or online. Before the plethora of devices and the Internet became available, investors used to visit the closest branch to open an account and complete the verification process. This means they had to set aside time to travel and bring all the necessary documents to prove their identity and intention for using the service, which may not be the most efficient use of their time.
While this traditional way may still appeal to some segments of the older generation, who have difficulty utilising technology, most users and investors have shifted online.
Investors can upload the necessary documents and take a selfie to prove their existence. Both pictures will be read by optical character recognition (OCR) technology to ensure that what you have typed matches with photos you have uploaded. Alternatively, the business can schedule a video conferencing interview, where the investor proves their existence and the documents supplemented belong to them. All in all, there is no one size fits all; it depends on each customer’s preference.
Learn more about how this is conducted is done using our
KYC with Lanturn
Our KYC & AML checks can be divided into two tiers:
Basic – Information obtained to verify the identity of potential/existing clients, shareholders, and investors.
Enhanced – This is for higher-risk customers, where a deeper understanding of the target individual/entity’s activities is needed to mitigate associated risks.
To understand the types of documents and information that we will collect to execute the checks, please review our Compliance Services. Due to the nature of our business, we currently do not cater to situations where the potential for money laundering or terrorist funding is low. If you have low-value accounts and they are high-volume, we recommend working with an e-KYC provider instead.
All our services include:
Collection and verification methods that comply with Data Protection regulations
A four-eyes quality check for all documents/information collected
Secure digital record-keeping
We understand that the risk profile of your stakeholders has the potential to change over time. Therefore, if you are subscribed to our “Outsourced Compliance Monitoring & Support” services, we will conduct KYC reviews of your shareholders and investors on a semester (six months) basis.
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