Why Do We Ask For Proof Documents?
Apr 22, 2021
Registered Address Ltd, as a formation agent, accountancy service and virtual address provider, is obliged to 'Know Your Customer' and thus do due diligence, under UK anti-money-laundering legislation.
Q: What does this mean for the average client?
A: Only that we ask for proof of ID and forwarding address.
Know Your Customer (KYC)
KYC is simply the process of gathering information in order to verify the identity of clients and make sure that they are not involved with money-laundering or any other type of financial crime.
Due diligence is the investigation or exercise of care that a business or person is expected to take before entering into an agreement or contract with another party, or an act with a certain standard of care.
In recent years Britain has firmed up its procedures with regard to anti-money-laundering. This is due to the ease in which money can be moved around the world, via the internet and international banking systems.
Without such procedures in place, a small minority of clients would use services like ours to hide from the consequences of their business activities.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), which transposed the Fourth EU Money Laundering Directive into UK Law, were laid before Parliament on 22 June 2017. They came into force on 26 June 2017.
A key difference of the MLR 2017 Regulations is to require 'relevant persons' (companies like ourselves) to adopt a more risk-based approach towards anti-money laundering, particularly in the conduct of due diligence.
Local UK authorities also require virtual address providers to do due diligence:
“The City of London introduced legal controls under the London Local Authorities Act 2007 which requires a virtual office to register with the Council, keep records of all clients who use their services and a copy of their identification and proof of address. Failing to register with the City of London, keep records as required or make false entries could result in a maximum fine of £5,000. The legislation applies London-wide but is adoptive so a local council can choose whether or not to implement the Act in their area."
So what does all this mean in practice?
For the client, not a great deal. Here is what we tell clients re: proof of ID and address:
- Please upload, to your account dashboard, a scan of a driver's licence, passport, European ID card or similar, for the account holder.
- Please upload, to your account dashboard, a separate photo of a tangible, complete, paper utility bill, bank statement, government letter or similar letter, posted to you from a substantial third-party, printed on headed notepaper, addressed to the account holder or your company name, bearing the forwarding address on the account, dated within the last 6 months. The document ideally should not be electronically generated e.g. downloaded from an internet account.
If we did not do basic verification of who our clients are, our virtual address service could be easily misused. Of the very few persons who misuse virtual address services in the UK, the authorities want to be able to get hold of them without having to spend a lot of time doing detective work.
So they ask companies like ours to 'Know Your Customer.'