Know Your Customer, better known as KYC, is a business principle within the Financial Intelligence Centre Act, 2001 (FICA). FICA encourages certified companies and entities to verify the identity of their clients before or during the time they do business.
FICA imposes certain obligation on all accountable institutions that have specific duties to fulfill. The aim of complying with FICA through KYC is to prevent money laundering. FICA requires accountable institutions to do the following:
- the duty to identify clients;
- the duty to keep records;
- reporting duties and access to information (Part 3); and
- measures to promote compliance by accountable institutions (Part 4).
According to BC Funding Solutions (2021), the role of KYC is to ensure compliance with FICA requirements and responsibilities. The KYC principle concentrates on the duty of every company to identify all clients during business relationship development and/ or every transaction that takes place. The due diligence process usually gives a company an idea of who and what it’s dealing with before the finer details of the transaction occurs.
The process of KYC includes the following:
- collection and verification of identity documentation, i.e. CIPC documentation;
- screening against warning lists;
- client risk assessment; and
- investigations into clients’ financial transactions, i.e. credit checks.
It is important to note that KYC extends to individuals, such as directors and shareholders, who are directly involved with the entity under the due diligence process. According to Moonstone (2016), for individuals, “proof of identification and address through to understanding a person’s source of wealth, and business interests” are critically necessary to ascertain. For businesses, “to understand the business, the entity structure, history, directors and shareholders, how the business operates and makes money” is important.
The onus is upon each entity to guarantee that their KYC process has been satisfied and completed because there are also consequences to non-compliance. According to BC Funding Solutions (2021), the following are consequences of non-compliance:
- a reprimand;
- a directive to take remedial action or to make specific arrangements;
- the restriction or suspension of certain specified business activities; or
- a financial penalty not exceeding R10 million in respect of natural persons and R50 million in respect of any legal person.
In conclusion, Tower Investments informs its existing and potential clients that its legal department may request specific company related and non-company related documentation and information to satisfy its due diligence processes and shall strive to ensure that the requirements of the Protection of Personal Information Act, 2013 are complied with.
For more information regarding KYC, please visit the following links: