While it's viewed as cumbersome and time-consuming, Know Your Customer (KYC) standards are designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing. KYC involves several steps to: establish customer identity; understand the nature of customers' activities and qualify that the source of funds is legitimate.
In this same vein, just like you'd go through KYC while applying for a bank account, Crypto exchanges require Know Your Customer (KYC) procedures to comply with laws and regulations designed to prevent money laundering and the financing of terrorism. These laws often require financial institutions, including crypto exchanges, to verify the identity of their customers and monitor their transactions for suspicious activity. By requiring KYC, crypto exchanges can demonstrate that they are taking steps to comply with these laws and regulations and reduce the risk of being used for illegal activities.
Why do exchanges need KYC for corporate accounts?
Corporations may also be required to provide Know Your Customer (KYC) information to crypto exchanges for the same reasons as individuals. This is because corporations, like individuals, can potentially be used to launder money. KYC processes ensure that corporates furnish details of themselves to exchanges that allow them to check for potential fraudulent and suspicious transactions.
What documents / info should a corporate prepare before venturing to open an account with a crypto exchange?
The specific documents required for Know Your Customer (KYC) can vary depending on the country, the crypto exchange, and the type of account being opened. The following are requested commonly,
1. ID documents for Founders and Directors: A passport, national ID card, or driver's license, etc for all founders or majority shareholders. The definition of majority shareholding varies between exchanges. We've had experience with companies that are holding-company structures and exchanges have asked to see shareholding structure showing who are majority shareholders ( an individual, corporate or family that holds 20% or more shares individually OR combined).
Some exchanges insist on verified documents that need to be done via an Accountant/lawyer.
2. Proof of Address: A utility bill, bank statement, or other official document that shows your name and address.
3. Incorporation documents: Documents such a copy of the certificate of incorporation, memorandum and articles of association and proof of registered address.
4. Selfie verification: Most exchanges we've supported our clients with have asked for a selfie of the Director / majority shareholder to be uploaded. Sometimes the exchange have a selfie verification portal and it captures your image and time when you access a link send out to your phone number or email.
5. Estimates of incoming and outgoing funds and volumes
6. The type of crypto currencies you'd like to have access to over an above the bigger cryptocurrencies
Note: This is not an exhaustive list, the details required by exchanges vary depending on the size and nature of the applying organisation.
What happens when you don't have one or more of these documents to hand?
If you do not have the required documents for Know Your Customer (KYC) on hand, it may be difficult to open an account with a crypto exchange. Think what'd happen in the case of a bank, you will try to find a different bank or see if some of the documents / details you have are acceptable as an alternate.
As an example, we've been asked a few times to upload a recent Certificate of Good Standing issued by the Companies House (UK) or a recent Bizfile (from ACRA, Singapore). While it was defined as the document should be dated within an year, we've used documents that were just shy of 18 months old with the express detail that there have been no further changes. We've also explained on a few occasions that getting a new certificate will cause money and delays which has resolved this matter amicably.
NOTES and References
https://cointelegraph.com/trading-for-beginners/what-is-kyc-and-why-do-crypto-exchanges-require-it
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