How to create a Know Your Customer (KYC) checklist

Anti-money laundering regulations (AML) are a raft of regulations designed to detect, deter and disrupt criminal activity. Know Your Customer (KYC) checklists are part of AML, and are specifically designed to help with customer identification and screening.

Any company with exposure to client risk, such as accountants, financial service businesses and solicitors, must develop a KYC strategy for engaging with customers, although specific KYC requirements vary depending on jurisdiction.

Know your customer (KYC) framework

An effective strategy for gathering customer information is to divide the process into three stages.

  1. Ascertain the identity of customers
  2. Conduct customer due diligence
  3. Undertake enhanced due diligence if this is necessary (due to political connections of the client, a high risk domicile, and so on)

This framework needs to be implemented as part of your customer onboarding process.

Customer due diligence varies, but generally means being clear about the nature of the business relationship and its intended purpose, the source and origin of funds, and the expected level and type of activity that will take place during your business relationship.

Enhanced due diligence may be required when customers:

You are also expected to continue to monitor customer activity for any red flag activities.

Use KYC forms to establish the identity of your clients

Know your customer (KYC) checklist

A basic checklist might include:

Working with businesses (B2B)

  • Registered company name
  • Address
  • Type/status
  • Nature of business
  • Company reference number/VAT number/GST number
  • Company directors/partners/owners (and contact details/personal information for the aforementioned)
  • Name of bank
  • Branch address
  • Account number/Swift code/IBAN

Supporting documents

  • Certificate of incorporation/incumbency/memorandum/articles of association
  • Audited annual report/financial accounts/statements
  • Share Register / Ownership Structure Chart
  • Confirmation of company address
  • Confirmation of identity of directors

If you are working with other entities, like Trusts, then you will need to request specific information like: full name of the Trust, date of creation, country of establishment, nature, purpose and objects of the Trust, and so on.

Working with individuals

  • Name
  • Address
  • Contact details

Supporting documents

  • Proof of identity
  • Proof of address

If someone else is acting on behalf of an individual, you will also need to identify the ‘beneficial owner’, as described by the UK government website:

As a general rule, the beneficial owner is the person who’s behind the customer and who owns or controls the customer, or it’s the person on whose behalf a transaction or activity is carried out.

Example from a know your customer (KYC) form

These examples have been created using File Request Pro, which is lightweight document collection software.

know your customer form

know your customer form

Compliance vs Customer experience

Although KYC checklists are essential for certain businesses, you do need to ensure that your customers don’t have a poor user experience.

If customer onboard takes 2-4 months and countless back and forth emails, then the time to value for your customers is too long. Even if they stick out the process, they won’t be your biggest fans by the end of it, a situation which could affect their decisions in terms of giving you future business or recommendations.

Common mistakes include:

  • Sending your customers digital KYC forms that look exactly like paper forms and are equally boring and hard to fill in
  • Requiring your customers to have an existing cloud account to upload documents
  • Asking customers to store yet more passwords or pin codes to send you documents
know your customer paper form
Digital forms can be much more engaging and approachable than old-fashioned forms

 

Digital know your customer (KYC) forms

If you are sending you customers digital forms then ensure the form is easy to fill in on any device for that specific customer.

Form layout

  • Make sure the form is responsive and works on any device
  • Give each question plenty of space so it is easy to read without peering at it
  • Use multi-page forms so you don’t over-face customers with lots of questions at once
  • Use headings and subheadings to make it easy for customers to understand what you need

Form fields

  • Use conditional logic to only show customers questions that are relevant to them
  • Use dropdowns, for example, that show multiple options without taking up lots of space
  • Include upload questions that are clear and easy to use (drag and drop files)

Form user experience

  • Make sure the form auto-saves and has forward and back buttons so customers can make mistakes or come back to the form
  • Include clear help text or example content so your customer knows what you need from them
  • Specify what content you need ‘under the hood’ so customers can’t send you incorrect information – just make sure customers know what you need so they don’t get frustrated

Collecting and organising information from KYC forms

In some ways, creating a form to gather key information and documents from your customers is the easy part of the process. What can be challenging – and is often given surprisingly little consideration – is where that information should be sent and how it should be organised.

It is vital that all information is not only sent to you through a secure, encrypted connection, but also that it is correctly stored and organised. Too much reliance on manual organisation (downloading and re-uploading to somewhere else) may lead to mistakes and lost documents. This can turn into a security issue.

If possible, automatically send all customer content and documents direct to your cloud storage, already organised into folders – by customer name, or reference number, for example. This way you ensure that customers’ documents are kept secure, organised and findable by all your team (with the correct permissions).

Collect and organise files direct in your cloud storage and keep confidential information secure

Automating your KYC strategy

If know your customer (KYC) forms or checklists are something you have to send to all your customers, then it makes sense to automate as much of the process as possible. This will save you time, and also hopefully reduce the onboarding process from months to weeks.

Rather than replacing your entire onboarding process with ‘bells and whistles’ software aimed at corporations, you can test out automating aspects of your KYC strategy with more lightweight (and less expensive) document collection software. This may not be sufficient for your needs, but with self-service free trials you can easily try them out and see.

Aspects of the process you can automate/repeat include:

  • ‘Smart’ reminder emails sent out to encourage customers to submit content and documents by a certain date, or in a number of days
  • Automated file request emails and thank you emails
  • Automatically sending files to your cloud storage, organised into folders
  • Templates or duplicate KYC forms so you don’t have to keep creating them
Automate reminder emails so you don’t need to manually chase clients for missing documents

Create your KYC checklist with File Request Pro

File Request Pro is lightweight document collection software that makes it easy for you to create branded KYC forms that you can send to your customers or embed in your website.

Create approachable multi-page forms that work on any device. Use conditional logic to only show customers questions that are relevant. Ask customers to drag and drop files without them needing to log in or have an account.

Content and files can be sent automatically to Google Drive, Microsoft OneDrive and SharePoint and Dropbox. Use Zapier to connect File Request Pro to thousands of other apps.

We take security very seriously. You can read our security commitments here.

For more information visit our website or sign up for a free trial and create your own KYI form within 20 minutes.