See it on video!We are excited to announce our first set of training videos
As we add new features and improve we’ll update with new content here, so you can always find the latest how-to resources for KYC3!
Check them out today:
Check out a new video that demonstrates KYC3 market intelligence capability by analyzing the corporate structure of Docler Holdings in 1 minute and 23 seconds… easy as 1:23.
More than a negative screening tool, KYC3 provides state-of-the-art tools to discover actionable market intelligence from massive real-time data feeds. Check it out!
Unleash your Risk Based Approach. Turn your compliance costs into competitive advantage.
Understanding the relationships of your client, counter-party or competitor is essential to your understanding of their motivations, resources and future behaviors.
1. Seeing the relationships will reveal if the target is “legitimate”. If the person claims to be a banker from the United Kingdom, is the person connected to the people that would normally be expected? Are there past banking relationships and business partnerships that show a track record confirming the person’s history?
2. Through relationships we may better understand the source of funds. Suppose the person who is opening an account at your institution claims to have a successful flower shop and intends to deposit several hundred thousand dollars per month in a business account, then you should expect to see a well established business in a good location that has been around for some time. If not, the relationships may reveal something else. For example, the person may be married to a city council member who actually controls hundreds of millions of dollars in zoning….
3. Relationships can be used to measure political exposure. If the person or company you are looking at is closely connected to politicians or their close relatives, then you may have a case of Political Exposure. This isn’t necessarily bad, but politically exposed persons must be treated differently. This is because politically exposed persons have a higher propensity to accept bribes or be involved in corruption and therefore need a different level of monitoring in your risk management program.
4. Relationships can reveal past mis-deeds or associates. A person may appear to be clean, but a relationship review may reveal that the person is in fact closely related to a problematic person from the past or has been involved in unwanted behavior in the past. Or perhaps this person is close to someone who has a bad past and is now “fronting” for that person.
We can use social networks on an ad-hoc basis to get some personal relationship information – as we tend to do with friends and family. But to understand real relationships – those with a legal dimension – we need to look at corporate and civil filings. Through analysis of these documents, we can see the connections and understand the past and present interests of our clients, counter-parties and competitors. Doing this in a structured manner with a tool like KYC3 is essential to any professional risk management effort.
Sanction lists and watchlists are lists of problematic entities (usually people, companies or vessels) that have been identified by relevant government authorities and are targeted for asset freezing or prohibited from doing business in that country or with nationals of that country, whether they are people or companies.
Usually the lists concern individuals and companies owned or controlled by, or acting for or on behalf of, targeted sanctioned countries. They also list individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific, but concern law enforcement or national security. In the U.S. such individuals and companies are called “Specially Designated Nationals” or “SDNs.” Their assets are blocked and persons are generally prohibited from dealing with them.
KYC3 automates the list checking process by allowing a full text search of most of the lists published worldwide with a single click. If there are any hits, further investigation and a risk based assessment can be made.
KYC3 offers an “Instant KYC Compliance Report” feature that is very easy to use. Here’s how.
First enter the name of the individual or company that you are looking for into the search bar. The more specific you are, the better your results will be. However, if you are too specific, you may miss some results. Since you can run as many queries as you need, you can quickly try several and see the results. If you search for “Mohammed”, of course you find sanction list hits, since there are many guys with Mohammed in their names on the lists. Narrowing the name down to “Mohammed bin Zayed Al Nahyan” on the other hand gives no sanction list entries.
Let’s walk through an example. Suppose that I have a potential new client named “Manuel Diaz”. The first thing I do is run his name in the system and get back the results. They show up looking like this.
It is quickly apparent that there is a Manual Diaz who is not a good guy. We can see that he’s born on 10 Feb 1954 and that he’s on the U.S. OFAC SDN Sanction List.
Getting a KYC report is easy. I just click on the big button that says “REPORT” right next to the search button. The system generates an Instant KYC report in PDF format for me. I get a dialog box asking if I want to open or save the file, like this.
Once I have the file, I can check it out.
We can see that Manual Diaz is on the U.S. list, but not on the other lists.
If I have any doubts about my Manual Diaz, I’ll have to check it out and make sure that he’s not the one on the U.S. list. Is he Colombian? Was he born in 1954? If either of these conditions is plausible, then we might want to dig a little deeper.
Using the KYC3 Instant KYC report feature, we can check to see if there are any hits that may require investigation with the KYC3.com compliance tools. If there are, we can use the KYC3 search feature to explore possible false positive results and confirm that our person is not the one on the list. We’ll cover that in another post.
Suppose you want to figure out who controls a company. How do you do that?
Say you’re interested in the Mexican restaurant “El Torito”. The first step is to search KYC3 for “El Torito”. In the search results we quickly see that the first item returned is the entity “EL TORITO FRANCHISING CO“. Clicking on it reveals that Fred Wolfe and Carmen Romano are related to the company.
Using the drop down context menu on the entity (the little arrow located at the right side of the entity), we can even select “Show In Graph”, and presto a visible relationship diagram of the related entities pops up.
From this we quickly learn that the business is located in Long Beach, California. We can also expand on these results by right clicking on one of the individuals. For example, Fred Wolfe, as shown in the 2nd picture below.
So it looks like Fred is the CEO and he is quite the restaurant magnate. In fact, if we use the search bar above the graph and refine our search into “El Torito Wolfe” we find from the first SEC filing in the results that indeed Real Mex Restaurants, Inc. is his holding company and that in 2005 he also acquired Chevy’s Restaurants.
There you have it: how to scope out a company in just a couple of minutes with KYC3. Due diligence done right … now.
Many people think that by verifying that their clients are not on the sanctions lists published by the competent authorities in their jurisdiction, be that the U.S. Treasury Office of Foreign Asset Control or Her Majesty’s Treasury Consolidated List of Targets, that they will be compliant and therefore safe.
This is a false sense of security garnered by a “tick the box” mentality. In order to properly manage risk, a risk based approach must be taken to understand and address that risk. This is why all lists need to be screened with a comprehensive tool. Because an individual identified and listed on one list is likely to show up later on lists in other jurisdictions. Governments share information, and while intelligence can be shared quickly, it rarely is necessary to do so with such urgency. Which means that the client who’s not on a list in your jurisdiction but on a list in another may become a serious problem for your organization in the near future.
After all, you don’t want to end up with an epic fail like Obama…
Sometimes its tough to evaluate the risk associated with PEPs. In fact, most compliance professionals seem to have a difficult time deciding if someone is a PEP or not. There are few resources to go on. The Central Intelligence Agency publishes some information in their World Leaders publication and in the World Fact Book. But aside from that, there is no real official list of PEPs. In addition to national regulatory bodies publishing guidance, the Financial Action Task Force has published a useful guideline, which is the international reference on PEP evaluation. By these guidelines, there are certainly a large number of PEPs out there: Foreign PEPs, Domestic PEPs, International PEPs, and their families and close associates. Basically anyone who is elected or appointed by an elected official can be considered a PEP.
Once the PEP decision has been made, which can be easily accomplished with KYC3 Instant KYC Reports, the risk needs to be evaluated. Rather than a simple tick the box exercise, the judgement is subjective and needs to take into account the individual and their associates in order to judge the risk that these people might be involved in an illicit financial transaction. Likewise, the countries and jurisdictions involved need to be reviewed for the risk they present. Are they offshore tax-havens? Where are they on the Transparency International Corruption Perceptions Index? The proposed relationship needs to be considered. Is the PEP proposing a current account to pay the expenses of their child in university in your country … or are they procuring a yacht? And finally the risk tolerance of the financial institution and its relationship with the regulator need to be considered.
Conducting a first level screening to determine the degree of political exposure is critical. Following up on all positive results with a comprehensive risk based assessment is the best way to properly manage PEP risk.
KYC3 - Know Your Customer, Counterpaty and Competitor 