KYC vs KYB: Onboarding Companies & Trusts

“Know Your Customer” covers individuals. “Know Your Business” covers the entities behind them, and that is where onboarding gets more involved.

KYC: identifying individuals

For an individual customer you generally collect and verify full name, date of birth and residential address, using reliable and independent sources. In Australia this is commonly done electronically, including through document verification services, or by certified copies of identity documents. The objective is reasonable satisfaction that the customer is who they claim to be.

KYB: identifying entities

For a non individual customer, a company, trust, partnership or association, you must identify the entity itself and the people who own or control it. The information required differs by entity type:

• Companies, full name, ACN/ABN, registered office and principal place of business, and details verified against the ASIC register; plus directors and shareholders;
• Trusts, the trust name, type and details from the trust deed, and the trustee(s), beneficiaries or class of beneficiaries, settlor and any appointor;
• Partnerships and associations, the entity details and the partners or office holders.

The beneficial ownership test

A beneficial owner is an individual who ultimately owns or controls the customer. The common threshold is ownership or control of 25% or more, but control can also be exercised through other means, voting rights, the right to appoint directors or trustees, or simply running the entity. You must identify each beneficial owner and verify their identity using a risk based approach.

Verify the person acting for the entity

Where someone deals with you on behalf of an entity, confirm their identity and their authority to act, for example, as a director, trustee or authorised representative.

Common pitfalls

• Treating an ABN lookup as full verification of the entity and its owners;
• Missing beneficial owners hidden behind multi layer structures or nominees;
• Relying on an out of date trust deed or company extract; and
• Failing to refresh entity information when ownership changes.