Like other KYC checks, Investor Verification Service is also gaining importance in Fintech industries. Fintech companies are the medium for huge transactions and valuable investments. However, it is also susceptible to identity verification and fraud. That is why authorities like FATF are emphasizing integrating a separate module for KYI.
What is Know Your Investor?
Read below and find your answers to how this works in creating safer investments.
What is KYI Verification?
Know Your Investor is a process used by financial institutions to verify investors and establish their identities. It is somewhat similar to KYC (Know Your Customer) because both involve verification steps based on a risk-based approach. KYI verification’s aim is to make sure that Fintech companies are fully aware of their investors so that they can keep fraudsters or criminals at bay.
No business wants to risk its reputation by accepting investments from criminals or money launderers!
Through strict KYI regulations, companies can become AML compliant in order to avoid any fines, penalties, or loss of money to identity thieves.
Benefits Of KYI Services
Knowing your investor verification is a process that helps companies and financial institutions identify and verify the identities of their investors. The benefits of Investor Verification Service include:
- Protecting against fraud: helps to prevent fraud by ensuring that investors are who they say they are and that they have the necessary qualifications to invest in a particular opportunity.
- Regulation adherence: aids businesses in achieving regulatory compliance for investment and securities offerings. Companies can avoid fines and legal repercussions for non-compliance by confirming the names of investors and making sure they match the essential requirements.
- Risk management helps companies assess and manage the risks associated with their investors, such as fraudulent activities or money laundering.
- Improved credibility: By using KYI services, businesses may show their dedication to compliance and moral business conduct, which can improve their trust.
- Enhanced due diligence: A critical component of due diligence for investment prospects is CDD. Companies can more accurately evaluate the risks and rewards of each investment opportunity by confirming the names and credentials of prospective investors.
- Increased security: contributes to increased security by making sure that only genuine investors have access to sensitive data on investment possibilities. By doing this, security flaws and other data leaks may be avoided.
Application Of KYI Checks in Different Industries
KYI is not just limited to banks. These are integrated by the following industries:
- Investment Firms
Investment funds companies are financial institutions that manage investment funds. Investment funds are pools of money collected from multiple investors, which are then invested in a variety of assets such as stocks, bonds, real estate, and other securities.
- CrowdFunding Platforms
Platforms provided by crowdfunding businesses let people or groups to raise money online from many different people for a project, venture, or cause.
These businesses offer a platform so that business owners, startups, and nonprofits may start campaigns, set financing targets, and ask for small donations from the public to help them meet those targets. In exchange, the investors could get different benefits.
Therefore KYI Checks are significant in signing deals with low-risk investors.
- Crypto Currency
This includes virtual currency trading and investments.
- Hedge Funds
Investment funds known as “hedge funds” employ a variety of tactics to provide profits for their investors. Financial entities known as hedge fund companies handle these funds, generally on behalf of high-net-worth net worth individuals, institutions, and other knowledgeable investors.
- Real Estate Firms
Real Estate Firms are known to be great contributors to investment projects.
All the above-mentioned industries need KYI verification to create a safe platform for secure investments.
Utilizing Corporate Documents For Online Investor Verification
Companies verify data by validating it against watchlists and corporate documents. The documents that are used for online investor verification may vary from country to country. These can be:
- Bank statements
- ID Documents
- Address Documents
- Credit Card Reports
- Ownership Documents
- Articles Of Association
- Lists Of Shareholders
- Lists Of Directors
- Source Of Income/Investments
How To Verify Investor (Process)
A huge part of Investor Verification Solution is automated AI verification tools, however, it is not limited to these security systems only. To effectively investigate the legitimacy of the investors on-site or video interviews are done as well. This allows institutions to understand the real intentions and aims of an investor. The process to verify investor involves a series of steps:
1- Information collection
2- Identity Proofing and Verification
3- Accreditation verification (If the investment opportunity is only available to accredited investors, the investor will need to provide evidence of their accredited status. This may involve providing documentation of income, net worth, or other qualifying criteria)
4- AML Compliance (Investments are susceptible to money laundering, therefore it is integral for customers to meet the laws and stringent checks of AML regulations)
Know Your Investor Solution is based on these series of basic verification steps.
Key Takeaways:
- Know Your Investor Service includes a series of verification steps to establish the identities of investors.
- It helps Fintech firms and other industries to be AML compliant.
- Data is validated against corporate documents.
- Know Your Investor involves identity proofing and accreditation verification.
