Know Your Customer, aka Know Your Client, is a process that most retailers will have been through multiple times 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 the majority of countries where you may want to trade. 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 and managed by that individual or business.
Anyone who has opened a bank account will have gone through this kind of process and provided information proving you are who you say. A copy of your passport or I.D. card, generic nodding and talking into your mobile phone. And proving that you are living / registered at the address you've given. 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 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. This includes financial tech such as PayPal and marketplaces like eBay and Amazon. Each payment made to you from a buyer is, if an organisation hasn't proven you are who you say you are, an opportunity to launder money. A customer buying non-existent goods through reputable organisations and paying their crime syndicate is the essence of money laundering crimes.
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 usually mixed in with other requirements of opening and account with the company, or more often these days anytime before the point at which you want to extract your money. It's never as straightforward as it could be and companies often have more stringent rules than is really necessary in order to fully protect themselves. In many cases, KYC is carried out by a reputable third party on behalf of the organisation, complicating things just a little bit more if there's a problem.
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 player. On-boarding to multiple marketplaces 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 in different regions that often have different requirements. A retailer with an Amazon UK account, for example, can trade throughout Europe because 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 or UAE, 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.
Some companies can also expect items that don't make sense in your country. In one instance I came across, a European marketplace using a third-party KYC partner was looking for a business registration document with a stamp no older than 6 months. This makes sense in much of Europe but in the UK our documents are stamped when we open the business, and that's it. UK sellers need to request an updated document from companies house.
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 professionally translated and stamped by a certified translator each time. You can sign up for accounts in a number of places at one time and put the account on hold until you want to use it.
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 skip the KYC process themselves and instead rely on the financial institution. This is only if the right agreements are in place between the organisations which is often not the case unfortunately.
In many marketplaces or ecommerce platforms if you are the right size of retailer for the org, you can often get onto an onboarding program and get some further support.
If you are still having challenges you can reach out to companies like Immerced who have the relationships in place and can help you through the process.
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