Small Business Coach

Now all banks are connected to the interbank Know Your Customer (KYC) platform. On the one hand, this carries risks for your business, on the other hand, it allows you to secure it.

Let’s take a closer look at this.

KYC – Know Your Customer

The KYC procedure (translated as “know your client”) obliges all financial organizations to identify and verify the identity of each client. Moreover, this must be done before he can conduct financial transactions. This protects companies from the risk of working with fraudsters and terrorists and ensures the safety of client assets. Once upon a time, it was only the internal policies of each company, but for about 5 years KYC has been established as a clear legal practice.

Here is what user data is required:

• full name; 
• date of Birth; 
• e-mail; 
• phone number; 

• country and address of residence; 
• ID (passport, license, etc.).

Simply providing data will not be enough. The phone number must be confirmed with a one-time code from SMS, passport data – photos of documents and a selfie with them, residential address – for example, a utility bill.

Markers on the Know Your Customer platform 

Let me remind you that in Know Your Customer there are three markers for companies:

• Green is an ordinary company; 
• Red is a company that is engaged in illegal operations. Usually, such a company’s account is immediately blocked; 
• Yellow is an ordinary company, but it has questionable transactions or in other words, it works with red companies.

You can’t work with Reds at all – it’s a risk for business. In addition, if the founder or director of a red company creates another legal entity, then the banks immediately see this.

Banks pay closer attention to yellow ones; it’s better not to work with them, otherwise you might get blocked yourself. To learn more about the Know Your Customer platform, be sure to read the KYC Requirements.

How to protect yourself from interaction with yellow and red counterparties?

Many banks have the service of a personal manager who checks all your transactions and warns about dubious counterparties before you have problems working with this counterparty.

Activate this service from your bank – it will save a lot of time and money in the future.

Who is in the red group?

The “red” group includes shell companies that are created to launder illegal income. The Central Bank does not disclose evaluation algorithms so that fraudsters cannot bypass them.

Companies and individual entrepreneurs with suspicious transactions attract attention:

• Instant cashing of proceeds; 
• increase in cash deposits to the current account.

The reason for increasing risk is zero payments on taxes, contributions, and wages. They even monitor the device being used – suspicion is raised when payments are sent from the same computer, but from different individual entrepreneurs.

How to find out your group

Organizations and entrepreneurs contact the servicing bank to clarify their risk group. Credit institutions are prohibited from refusing to provide information, even if the company does this daily.

To obtain information, a paper or electronic application in free form is submitted to the bank. If a company falls into the “red” group, the bank will notify it of the change in status within five business days.

Restrictions for “green”, “yellow” and “red” clients

Green clients have no restrictions. Transactions between bona fide clients are not blocked, and supporting documents are not requested. But only before the first offense – connections with “yellow” or “red” companies, frequent cash withdrawals, and other suspicious transactions.

“Yellow” clients are asked for documents on all transactions, except budget ones. Based on them, the bank decides to make a payment.

“Red” organizations are prohibited from almost everything – settlements with counterparties, cash withdrawals, and the use of other electronic means of payment. Access will be given to:

• Budget payments; 
• payment of wages to employees who were in the organization before the lockdown; 
• withdrawing money to cover the living expenses of the individual entrepreneur and his family; 
• credit payments.

Why is KYC important?

The purpose of the principle is to ensure a safe financial environment, prevent money laundering, and eliminate the risks of terrorist financing. Using Know Your Customer, banks and other financial institutions identify each customer – whether they are who they say they are and what their history is.