If you’re looking to understand the specific KYC requirements for investors, you’re in the right place…
In this article, we’re going to explain the KYC and AML process that investors need to complete when opening bank accounts.
Of course, investors still need to pass the standard account opening process, which can be a challenge in itself.
So, if you’re looking to open US bank accounts you may want to start by taking advantage of free non-resident US banking resources such as Can a Tourist Open a Bank Account in the USA?
Feel free to use the table of contents to jump ahead to any sections that are immediately relevant to your search.
Table of Contents
- KYC Requirements for Investors
- Why Does KYC Matter?
- Frequently Asked Questions
- Ready to Open Accounts With Banks in the USA?
KYC Requirements for Investors
It’s important to note that KYC requirements exist for all prospective bank customers, whether you’re looking for an online checking account with a virtual debit card or a wealth investment account. However, there are some nuances that relate specifically to investors. We’ll start by sharing unique investor considerations and then provide an overview of KYC below.
Investor KYC Considerations
In most cases, investors are looking to open accounts that have above-average account balances and that will facilitate investing rather than ITIN mortgage loans or everyday checking accounts. With this in mind, many banks will require additional documentation proving the source of wealth. This is especially true if the prospective customer has a limited online profile and the bank can not verify their past wealth-generating activities through third-party sources (e.g. liquidation of shares in a public company as an executive).
Standard KYC Documentation
Standard KYC requirements for investors include government issued identification confirming name, nationality, and date of birth. Customers will also need to provide proof of address in their country of tax residence. Not to mention, documentation supporting their source of income and wealth.
Investors may also be asked to provide additional documentation to prove their source of wealth if it is significantly higher than the average client.
Not surprisingly, KYC is becoming increasingly automated through the use of compliance algorithms and online databases. As a result, customer due diligence and enhanced due diligence are becoming more accessible for smaller financial institutions.
However, when financial institutions rely too heavily on automated systems and algorithms, it often results in accidental account freezes. Or worse, outright closures. This can have a very negative impact on customer experience.
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Customer Due Diligence Process
Customer due diligence (CDD) is the process of collecting information on your customers to confirm that they are not engaged in illegal activities. It includes KYC checks, AML checks, compliance database screening, and ongoing due diligence.
How Long Does Investor KYC Take to Complete?
As an investor, you may find that banks are willing to expedite the KYC process for you if you are looking to open a private bank account, wealth management account, or invest directly through the bank.
Now, this doesn’t mean that banks will skip over the KYC process. Instead, investor clients can typically have their applications pushed to the front of the line. Banks do this because they can typically generate significantly more revenue from an investor than they can from standard retail customers.
Why Does KYC Matter?
As a customer, it’s easy to get annoyed with the bureaucracy and paperwork requests that can come from ongoing KYC requirements. That said, it does offer value, not just to the regulator or bank, but also to you and fellow bank customers.
With this in mind, here’s an overview of what KYC is and why it matters to governments and regulators, banks, and bank customers.
Governments & Regulators
KYC (Know Your Customer) refers to the process that banks and financial institutions use to confirm the identity of prospective customers. This includes identifying organizations involved in prohibited or illegal activities, including (but not limited to) money laundering or terrorist financing. Governments and regulators want this in place as it (theoretically) helps stop illicit activity from taking place.
Banks & Financial Institutions
From a more practical perspective, banks use the KYC process to get a better sense of who you are. But also, where your money comes from and what you plan to do with that money. This ensures that any prospective customer is actually a customer that the bank wants to do business with. And, it helps the bank protect itself from any illegal activities that a prospective customer might be involved in, which could result in major fines, investigations, or other regulatory action against the bank.
Bank Customers
Yes, bank customers also benefit from well documented KYC processes. In short, if you open accounts at a bank with weak KYC, AML, and compliance practices, there is a higher likelihood that those banks will be used by high-risk customers for banking.
Unfortunately, if you choose to bank at institutions with weak compliance, your accounts have a higher likelihood of being caught up in investigations, account freezes, loss of correspondent bank relationships, etc.
And, in case you’re wondering, such outcomes (investigations, freezes, etc) have occurred many times across a wide range of jurisdictions. Including EU member states, Caribbean banking hubs, and even respected European private banking jurisdictions.
Frequently Asked Questions
Below are three of the most common questions that we receive from investors looking to open bank accounts. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
Do Banks Need to KYC Investors?
Yes, banks need to conduct KYC on investors. This will include a detailed assessment of the source of wealth, source of income, and other standard requirements before account opening can be approved.
When Does KYC Apply?
KYC applies during the account opening process. However, banks also routinely check to confirm customer information is up to date and accurate. This ongoing KYC process is part of a broader initiative known as Ongoing Customer Due Diligence (OCDD).
What Are the Basic Requirements of KYC?
Basic requirements of KYC include confirming an applicants legal name, date of birth, and residential address. But, that’s not all. It also includes a government issued identification number, tax identification number from their country of fiscal residence, source of income, source of wealth, and whether they meet any high-risk criteria that would necessitate further due diligence.
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