KYC Due Diligence: Build your Winning Business Relationship

KYC Due Diligence: Know who you are Dealing With PHOTO: PIXABAY

- Know Your Customer or KYC due diligence in financial services requires that professionals make an effort to verify the identity, suitability, and risks involved with maintaining a business relationship.

- KYC processes are employed by companies of all sizes for the purpose of ensuring that their proposed customers, agents, consultants, or distributors are anti-bribery compliant, and are actually who they claim to be.

- The objective of KYC guidelines is to prevent businesses from being used by criminal elements for money laundering. It also enables businesses to better understand their customers and their financial dealings.

Singapore is in the list of top 10 safest countries in the world, based on accredited risk assessment website, SafeAround. However, low crime does not mean no crime, especially with scams targeting B2B and B2C businesses prevailing on the front pages of major newspapers and online discussion forums.

More than one third of Singapore-based organisations (35%) experienced economic crime, up from 22% reported in 2016. The level of reported economic crime is at a record high not only in Singapore but also globally (49%).

KYC Due Diligence: Know who you are Dealing With

Criminal syndicates infiltrate into companies

The alarming increase in economic crime indicates that sophisticated criminals have been manipulating normal business owners in helping them to achieve money laundering globally. Some of the most common crimes are money laundering, terrorist financing, fraud, tax evasion, embezzlement, forgery and counterfeiting.

One of the most common methods is to invest the money through a legitimate business owned by a criminal organisation. The fraudulent business can then earn cash revenue and deposit the money into its bank accounts.

The director and shareholders who are in the same criminal organisation can then withdraw the money as director’s fee or shareholders’ dividend.

Being unable to identify the modus operandi of these syndicates will expose innocent business partners to the risk of government scrutiny, leading to the possible surrender of affected monetary investments to reinforcement authorities. Eventually, this can cause the reputation of innocent corporate companies and business owners to be ruined.

Organisations can take preemptive measures by conducting regular Anti-money Laundering (AML) and Know Your Customer (KYC) checks as part of their compliance management system.

To build a strong and robust financial crime prevention system, companies need to understand what these processes entail. Performing KYC checks include taking steps to verify customers’ identity background.

Social listening and checks using AML/ Politically Exposed Person (PEP) listings can help to verify stakeholders and raise potential red flags. During the process, personal information such as name, nationality and gender should be recorded before being evaluated.

Keeping track of stakeholders: Suppliers and customers

Start by treating your suppliers as true partners and not just vendors by understanding their business concerns and achievements. Without understanding your suppliers’ reputation, you will be unable to evaluate them and plan for major contingencies. If the daily operations of your suppliers are affected, it will in turn stress your company’s supply chain.

Next, aim to understand your customers by putting yourself into their shoes. Once you understand how customers view your competitors, you will stand a much better chance of staying ahead of the competition by addressing customers’ needs.

Looking for verified business opportunities

Do you believe it is difficult to find a trustworthy partner? In our ProKakis survey in 2018, the most recognised problem for entrepreneurs is escalating manpower cost and finding the right partner to expand their business, resulting in stagnant growth in business revenue.

Collaboration is fundamental to improving business results and it tends to benefit all parties by increasing their market share. Before a collaboration begins, business verification is important in ensuring that a suitable business partner is found.

A partnership will be successful when there is a shared goal or common target market. Establishing a common purpose or common business objectives would be difficult if either partner has a hidden agenda.

Searching for suitable investors

Before funding from investors can be obtained, information on the company seeking investment, such as its company structure, reputation, awards and patents need to be submitted.

Companies should also be diligent and find out more about their prospective investor before accepting the offer. Before embarking on a collaboration, companies have to ensure that they would be willing to share their profits with the investor.

In addition, there should be synergy between the parties working together. Finding out more about potential investors shows that one is serious about making the collaboration a success. It also reflects the culture of the business and its credibility.

When a potential investor is impressed by a company’s professionalism, they would be more likely to take the initiative to undertake the collaboration.

KYC Due Diligence is no longer a means purely for compliance. Instead, it should be used as a tool to build winning business relationships. Finding positive attributes in current stakeholders and prospective partners can go towards creating assurance for the long-term survival of a company’s supply chain.


This article originally appeared in the Entrepreneur's Digest print edition #88 and has been edited for clarity, brevity and for the relevance of this website.

About the Author

Elisha Yap | KYC Due Diligence, ProKakis | Founder

In a span of two decades, Elisha’s wealth of experiences as a Chartered Accountant has helped business owners achieve their next level of growth through cloud accounting, restructuring and digitisation.

She leads ProKakis by protecting business owners against corporate scams, dubious business ventures and questionable business partners that arise from a lack of business intelligence. She has advised more than 300 business owners to embrace AML regulation as a strategy to increase corporate revenue.