Know Your Customer (KYC) and Selling Overseas

Know Your Customer, or Know Your Client as it’s sometimes known, is a process that most retailers will have been through in the past. So what is KYC, why does it matter to you and why is it important in International eCommerce?

What is KYC?

KYC is a regulation of Financial laws in many countries. It’s main purpose is to try to protect banks and other financial institutions from being used for money laundering. These regulations insist that the institutions make efforts to prove an individual, or Business (KYB), is who they say they are and that the instruments they use for transactions, e.g. bank accounts, are in fact owned by that individual or business.

Anyone who has opened a bank account will have gone through this kind of process, proving they are who they say, such as a copy of their passport or I.D. card and that they are a live where they say the live. This process for individuals can be a problem if you don’t exactly fit the criteria and it’s more complicated when doing such things for a business.

Why does KYC matter to you as a retailer?

As a retailer, large or small, every time you register with an organisation that will take payments from a customer and transfer it to you, you will need to go through a KYC process. If you think about, each payment from a buyer is, if the organisation hasn’t proven you are who you say you are, an opportunity to launder money. Buying non-existent goods through reputable organisations and paying yourself is the essence of money laundering.

As a retailer, and especially an online retailer, you will likely transact with multiple organisations. If you sign up with PayPal, you’ll go through KYC, with your bank, you’ll go through KYC, with Amazon, you’ll go through KYC.

This is also usually mixed up with other requirements of opening and account with the organisation so it’s never as straightforward as it could be. They often have more stringent rules than is really necessary in order to fully protect themselves.

Why is KYC important when selling overseas?

For international sellers it’s likely you’ll be involved in the process more than a purely domestic retailer. On-boarding to multiple marketplaces for example means opening multiple accounts and going through several KYC processes. Even within the same business, such as Amazon, you may need to go through multiple KYC processes. A retailer with a UK Amazon account for example can trade throughout Europe, as the KYC process is compliant with the European Joint Money Laundering Steering Group rules, but if they want to list on Amazon US or Mexico, they will need to go through more account opening / KYC processes.

A further complexity when opening accounts overseas is the language. Organisations can only accept documents in the language the rules allow. Many countries fortunately allow English documents along side the local language, but not all. This means, if your business documents are not in English or the local language you’ll need to get them translated by a certified translator.

Making KYC Simpler

The best way to manage KYC is to always keep your store of documents up to date. Proof of address should be straight forward, we all have bills!, but business registration documents usually have to be less than 4 months old. This means requesting up to date documentation and, if they aren’t in English, getting them translated each time. So it’s best to have a process for this or sign up for all accounts you want to use within a certain timeframe.

Another way is to use marketplaces or organisations that can use existing KYC registrations. Marketplaces that pay out to PayPal or Payoneer for example can, if agreements are in place, skip the KYC process themselves and instead rely on the financial institution. This is one of the reason’s I would expect to see these sorts of companies continue to go from strength to strength.

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About Mark Ellis

Mark is the VP for Growth and Partnerships at Webinterpret, a leading Cross Border Technology company. Before that Mark was leading the operations for eBay's European cross border program. He has over 20 years of eCommerce industry experience, guiding and delivering strategic change in retailers, working with companies such as Dyson, Regatta, Boots and Arcadia Group, leading multi-million dollar programs for industry giants like Dunnhumby and working with small businesses delivering innovative retail solutions.

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