Compliance evolution: CFT-C, AML, KYT/C/B, FinCEN etc.

Compliance, securing any financial transaction, is composed by KYT, KYC/B, CFT-C (countering financing of terrorism or corruption) and AML (reporting money laundering/financial crimes to authorities), including customer identification program CIP, Enhanced Due Diligence EDD. Compliance teams analyze relevant alerts from international flows, connected to international financial sanctions programs.

Then, CFT officers track all funds movements, their sources, while searching any risk, any suspicious movement or revenue source that could be or lead to of terrorism financing. KYT Team controls risky transactions, focusing on companies/people reporting or identity checking during account opening step, including CIP, EDD. KYB is focused on corporate entity while KYC is checking identity of customer or named individual. Automation, high-tech, RegTech reduce time, budget costs, making KYC more accurate, more reliable. Finally, EDRs will update, optimize procedures.  

KYC process steps

1/ Company information

Full company name, date of incorporation, registration number, VAT number, type of industry, legal structure, registered address, business description, company mobile/email, number of employees, estimate turnover, monthly fees or spending, company’s website if so, which bank accounts & how many does the client have etc.

2/ KYB process & Business information : corporate documents

Status; Extract from the register (certificate) not older than 6 or 3 months with information about company board members/directors + all beneficial owners &/or ultimate beneficial owners UBOs (having 25% or more of company shares).

UBO (the person who has relevant control in the company) identity must be confirmed. KYB team has to determine also corporate relationships purpose or planned transactions and where their Funds are originated from. 

If client provides fresh extract then the question of company status (active or inactive) is solved. If the client is the only owner of the company, He has to present the declaration or liquidation of the Corporation Tax (applying to profits obtained by companies) within the document including also information about shareholders.

Risk level - company scoring with country of incorporation (its risk level), subject or not to financial sanctions, industry risk, entity risk & communication risk etc

Individual scoring status within country of citizenship, country of residence, Expective Positive Exposure risk, subject or not to financial sanctions, communication risks etc

Banks are able to conduct an account opening with legal entities only; freelancers are registered in «business register» without mandatory VAT number.

3/ KYC process - identity verification with a board member : ID document, passport, resident permit, driving licence + live picture made in real time. Finally will be made a KYC video interview as a remote identification of clients reprentative. This step reduces paperwork, time, human errors, identity frauds while increasing security.

Will be also asked sometimes : corporate bank statement under the company name, municipality certificate or other residence proof, utility bill (electricity bill for instance) or resident permit or visa.

 CDD Customer Due Diligence is also used to verify the identity of clients.

Case of declined KYC : if it is a scanned photo of ID or passport (because photo of document should be taken in real time) or if it is a domestic document (ID should be original in « official format » used for instance for travels in different countries. Client activity will be then regularly checked and any changes in their risk profile reported. Besides, additional needed due diligence will be done.

Are needed : provided notarized copy of documents which should contain client details, company information, documents (extract from register), KYC, risk level notification, KYC video checking identity

Different types of high risk client cases : Politically Exposed Persons (PEPs), Customers from high-risk jurisdictions, Large or complex transactions, Transactions involving multiple customers, Unexplained wealth or income

Are reviewed all following points : KYC Profiling, Documenting the Beneficial Owner, Risk Classification, Sanctions and PEP Screening, KYC Management, Integrated Checks in the Onboarding Process within AI-powered tool against money laundering

Digital tools are used in banking area for KYC such as Atico or even Thales IT tool offering biometric verification within KYC cloud services to secure digital onboarding. They also offer eKYC, facial recognition, digital account. 

High risk case : 1/KYB does the boarding process, 2/ AML approves risks

3/ According to The Bank Secrecy Act BSA, AML must send this type of case to EDD Enhanced Due Diligence to detect suspicious activity, reduce potential financial crime or money laundering. This department will monitor risk management/assessment & client activity. It will 1rst collects deeper information on high-risk clients : source of wealth or funds, beneficial ownership structure, other business relationships/activity). Then EDD will make transaction controls, reports to regulatory authorities, checkings.

4/ Reviews will be written for the client company, then request of board approval will be sent

5/ Board member reviews, approves company modification report

Special cases: Jewellry companies, needing secure proof of ownership or authenticity, date of sale through digital certificates for each single item they sell, face high risk for money laundering. What increases that risk of fraud is : a big market size, high prize, type of product (jewel, precious stone or metal), risky location.  Regarding « watch parts », there are lots of regulations on shipping/transport or restriction fo several countries and special paper work that need to be provided. Compliance with international legal norms is really important to delete risk of interacting with untrustworthy clients, suppliers or partners.

Money laundering risks in real estate is due to high properties value or type of transaction in cash: a huge amout of criminal organizations have used real estate market to whitewash their corrupted funds. Because of cryptocurrency’s anonymity increasing fraud risk, legal regulations will have to develop new laws in the next few years. So AML process will check dealers are not linked to drug dealing. Meanwhile, Offshore Funds or Hedge Funds go through CIP & KYC special process: They have to provide 4 pieces of credentials: name, birth date, adress, identification number.

Meanwhile, AML includes  suspicious activity reporting SAR and checking of TXN unique Transaction number assigned to every transaction in the issuing BANK online system). This is the reason why FinCEN, Financial Crimes Enforcement Network, is since 1990 enforcing any international or federal, state, local implemented law. It can provide information to banks helping their AML process by analysing all necessary information required under the Bank Secrecy Act BSA. Individual, foreign organizations must report their true beneficiary information BOI, legal company name, its address, its juridiction, legal structure, or federal taxpayer ID number.

In France, Tracfin, attached to the Ministry of the Economy and Finance analyse all suspicious movements of clandestine funds. In partnership with the AMF and ACPR, Tracfin will investigate in order to fight against money laundering, tax, social and customs fraud, as well as the financing of terrorism. In Monaco The Siccfin Financial Circuits Information and Control Service works in partnership with european MONEYVAL, EGMONT, international GRECO, or many other foreign supervisory authorities (Luxembourg CSSF or Swiss FINMA for instance). Monaco also uses Public safety, CCIN Control commission of nominative informations (within IOSCO, IFREFI, NGFS) or CCAF Organization of compliance & internal control functions of approved entities. In 1995, TRACFIN created with other organizations the Egmont group (which it chairs with other members within the European economic zone), a forum for exchange and cooperation for more optimal supervision and compliance policy of the budget as well as better financial information.

Created in 1997, Moneyval European organisation is helping Banks or financial institutions to delete Money Laundering & Terrorism Financing. Since then this Committee of experts, being the Council of Europe is constantly assessing compliance with main international measures. Compliance or risk in real time is made possible through AML screening solutions in order to secure transactions: this will check the whole sanction lists, watchlists, Politically Exposed Persons PEP lists in many countries. 

Furthermore, GRECO Group of States against corruption works within the Council of Europe since 1999. It is present throughout worldwide various members and directly monitors any application of laws against corruption. Global FATCA Foreign Account Tax  Compliance Act allows more transparency about any american citizen or green card holders abroad. CRS Common Reporting Standard is focused on information exchange between countries in order to avoid tax fraud of non resident citizens.

The extract from register (K-bis extract in french) is a document issued following company registration in the National Register of Companies (RNE). It contains essential information about company, such as: company name; Registered Address ; siren number ; NAF Code ; ruler name. 

Freelancers & self employed entities register in micro enterprise taxation system via URSSAF. Free lancer is a legal entity: banks are able to conduct account opening. Free lancers are obliged to have a VAT number if their turnover is upper than 34 400 euros and if the company is operating with share capital. (Ex : SASU simplified single person joint stock companies or EURL one person limited liability companies).

Any company dealing with financial activities will of course have to provide a license proof during KYC process. Otherwise due to low generated income, micro companies or Freelancers do not need a VAT number. A micro company or sole trader must open a separate account for their freelancing activity. Individual entrepreneurs with limited liability  or EIRL (in French) are obliged to open a professional Bank account.