Accountancy firms in the UK face constant risks when dealing with clients who may not be as trustworthy as they appear.
Financial institutions are, therefore, required by law to comply with Know Your Customer (KYC) regulations to prevent criminals and fraudsters from abusing financial products and services for their own gains.
Financial crime on the rise
The Global Economic Crime Survey reported that between 2020 and 2022, 64 per cent of businesses in the UK have experienced fraud, corruption, or other financial crimes.
This is a significant increase from the 56 per cent reported between 2018 and 2020, and 50 per cent reported between 2016 and 2018.
With fraudulent activity on the rise, the Financial Conduct Authority (FCA) is toughening up its stance on ensuring accountancy firms are compliant with KYC regulations.
What is KYC?
KYC is a set of guidelines and procedures in place to help accountancy firms verify the identity of their clients and assess the potential risks that they could pose to the business.
Any accountancy firm that is found to be in breach of KYC regulations can be hit with heavy fines and runs the risk of reputational damage.
At the heart of KYC compliance is ensuring that clients are identified accurately.
Accountancy firms can achieve this by obtaining client information such as their name, address, and date of birth, plus any other relevant information like bank details or identification numbers.
They would then verify this information to prove that the client is genuine.
Accountancy firms must also conduct a risk assessment for their clients. Not all clients will pose the same level of risk, so accountancy firms must consider factors, such as the client’s business sector, their geographical location, and the complexity of their financial activities.
It cannot be safe to think that once a client has passed all KYC checks they will forever be a trusted business to work with.
Over time, businesses can change their strategies and owners, and this upheaval could open the door to potential criminal and fraudulent activity.
It is important then, to regularly monitor and review client information to ensure it remains accurate and up to date.
This may involve reviews of client documentation on a pre-determined basis, or inspection of transactions to ensure there have been no unusual or suspicious amounts taken.
Solid KYC compliance relies heavily on the expertise and knowledge of the subject from all employees.
Accountancy firms should provide regular training on KYC regulations to its staff, including information about the firm’s internal policies and any software that is used to facilitate KYC processes.
It is crucial that KYC compliance is managed properly by accountancy firms for the benefit of not only the firm but for its clients.
KYC checks can often be a rigorous and time-consuming process, but with Summatech’s Client Onboarding software, this process can be carried out much more efficiently.
Client information, background checks, and risk assessments can all be managed with the tool, handing you back hours of time that can be put to more productive use.
If you’d like to know more about our client onboarding software which includes tools to help with KYC and risk assessment, then please contact us today.