Perspective

How KYC, CDD and Ownership Evidence Fit Together

KYC is often used as an umbrella term for knowing a customer. Customer due diligence is the work that makes that knowledge reliable: establish who the customer is, who owns or controls it, why the relationship makes sense, and whether later activity remains consistent.

Identity is one part of due diligence

For an individual, identity evidence connects a real person to the records held by the firm. For a company, the firm must also understand the legal entity and confirm that the person acting for it has authority to do so. Verifying a director or signatory does not, by itself, explain who ultimately owns or controls the company.

FATF Recommendation 10 groups several distinct tasks within customer due diligence: identify and verify the customer, identify and take reasonable steps to verify the beneficial owner, understand the purpose and intended nature of the relationship, and conduct ongoing due diligence. The extent of those measures is risk based. Local law determines how the international standard is implemented, including which firms and customers it covers.

Follow ownership and control to the people behind an entity

A beneficial owner is the natural person who ultimately owns or controls a customer. A company may be owned through one or more parent entities, or control may arise through rights or arrangements that do not appear as a simple share percentage. A useful ownership record shows the path from the customer to the natural person or persons, the basis for identifying them, and the evidence used.

Keep three questions separate: does the entity exist; who is authorised to act for it; and who ultimately owns or controls it? A company register, ownership chart, constitutional document, customer declaration and identity evidence can each answer a different part. A registry entry is a useful source, but its coverage, access and update timing differ across jurisdictions. FATF's guidance supports using information from more than one source to improve the availability and accuracy of beneficial ownership information.

Resolve conflicts and keep the picture current

Suppose a customer declaration names two individual owners, while a registry extract shows an older parent company. The difference is a question to resolve, not a reason to copy one record and ignore the other. Confirm the dates and sources, trace each ownership layer, clarify any change with the customer, and record how the firm reached its conclusion. If the records remain incomplete or inconsistent, route the issue to the appropriate decision maker under the firm's procedures.

Due diligence continues after onboarding. Changes in ownership, authorised persons, purpose or expected activity can make earlier information stale. Ongoing review compares what the firm now observes with its current understanding of the customer and refreshes evidence when risk or material changes warrant it. Enhanced due diligence adds measures for higher risk circumstances under the applicable rules and risk assessment. It should answer the remaining risk question, not simply add documents without a clear purpose.

Use registries with care across borders

A registry can make ownership easier to check, but it is not the whole due diligence process. Check what the register records, who can access it, what date its information reflects, and whether the structure or control arrangements require additional evidence. FATF Recommendations 24 and 25 address transparency of legal persons and legal arrangements respectively; implementation and available records vary by jurisdiction.

A 2019 NICE Actimize article on differences among KYC registries credited Trevor Barritt as a research and content contributor. Its country examples describe the situation at that time, not current legal requirements. The enduring practical point is to assess the source in its local context, then corroborate important ownership information where the risk and evidence call for it.

Common questions

Is a company director always its beneficial owner?

No. A director may manage the company or act for it without owning or ultimately controlling it. Due diligence should distinguish the entity, its authorised representatives and its beneficial owners.

Can a company registry replace beneficial ownership checks?

Not by itself. A registry can provide useful evidence, but its scope and update timing vary. The firm still needs to understand the ownership and control structure and resolve material gaps or conflicts in light of applicable requirements and risk.