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Startup Guides May 15, 2020 2 min read

What are the KYC (Know Your Investor) and AML (Anti Money Laundering) checks?

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Nadya Rajput

Confirmation that you have completed AML (Anti-Money Laundering) and KYC (Know your Customer) checks are a requirement for application under the Government’s Future Fund. Even if you aren’t applying for the Government’s Future Fund, it’s still good practice to comply with AML regulation and KYC requirements during your funding round (this is mandatory for most investors), and run through the checks whenever you are accepting investment or going into business with anybody new.

Read on for our guidelines…

What is AML and KYC?

The collective AML framework is designed to combat money laundering, terrorist financing and threats to the integrity of the financial system. The legal obligation to evaluate risks associated with money laundering and terrorist finance, through carrying out AML checks, is placed on anybody operating in the following businesses: Credit institutions, Financial institutions, Auditors, insolvency practitioners, external accountants and tax advisers, Independent legal professionals, Trust or company service providers, Estate agents, High value dealers, Casinos, Businesses carrying out cryptoasset activities, Art market participants, and Letting agents. If you fall under one of these regulated categories, you should seek further advice from your regulatory authority.

Where AML checks are designed to ensure that no monies you are receiving have come from criminal or terrorist activity, KYC checks specifically verify the identity of your customers and investors together with their financial activities and any risks they may pose. The KYC checklist is fairly exhaustive, it’s a thorough due diligence. You’ll be able to access our standardised checklists on the platform shortly.

Compliance with AML is always required for service professionals, such as solicitors and accountants representing clients. There is no legal onus on all companies to carry out AML checks, but we do encourage all companies to take steps to ensure that the monies that you are receiving haven’t come from any criminal or terrorist activity. It’s good housekeeping.

Here’s our AML checklist:

If you are receiving any funds from an individual, you should ask for :

  1. ID Card or passport with photograph, name, date of birth and nationality (and name change document if applicable)
  2. Residential and permanent (if different) address proof e.g. copy of utility bill or bank statement issued within the last three months and displays name as per registration. E-statements and P.O. Box mailing addresses are not acceptable
  3. Information on occupation and source of funds for investment (a declaration on the subscription form or a signed High Net Worth (HNW) letter will suffice. Otherwise a bank statement showing funds.) You can create an HNW certificate on the SeedLegals platform, available under Quick Agreements.

If you are receiving funds from a Corporate Body, you should ask for copies of the following:

  1. Certificate of incorporation or equivalent (and certificate on change of name if applicable)
  2. Memorandum and Articles of Association (or equivalent)
  3. List of directors and proof of residence of two officers
  4. Confirmation that the investment is made for the company’s own account and not on behalf of any other party OR as a nominee vehicle on behalf of others (a declaration on the subscription letter will suffice)
  5. Confirmation on the source of funds for investment (a declaration on the subscription letter will suffice)

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