Client Onboarding 101: Understanding and navigating the onboarding process

Introduction

As a new client entering a professional relationship with a corporate and trust service provider (CSP), the onboarding process can seem overwhelming and, in some cases, slightly intrusive for what you might perceive to be just a formal necessity filled with paperwork and procedures.

However, the client onboarding process is fundamentally designed to establish a secure, compliant, and effective partnership that protects not only the financial and operational integrity of our business as the CSP, it also safeguards your interests as the Client.

In our latest blog post, we walk you through what to expect during the client onboarding process and explain why each step is crucial for mutual security and trust.

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Pre-Onboarding Preparation

Before we embark on any formal relationship with a client, certain preliminary steps must be undertaken. This begins with basic client identification and verification, commonly known as KYC (Know Your Customer).

During this part of the process, you will be asked to provide personal identification documents and verification of your address to ensure that all our interactions and transactions are conducted with duly identified individuals.

Documentation collection is therefore critical and you will be required to submit various documents, including proof of address, professional references, and source of wealth and source of funds information, which are essential for creating a transparent and accountable financial relationship and reduce the risk of fraudulent activities.

Due Diligence – The First Line of Defence

Due diligence involves assessing and understanding the potential risks of doing business with a client. It is our first line of defence against fraud, corruption, and illegal activities, ensuring that our business operations adhere to international standards of legal and ethical conduct.

Depending on the nature of our engagement, due diligence can vary in intensity:

– Basic: For all clients to verify identity and assess risk.
– Standard: For most clients, includes financial health checks and professional background analysis.
– Enhanced: For high-risk or high-net-worth individuals involving in-depth background checks.

At a basic level, our due diligence requirements require for the collation of the following:

– An original, certified copy of proof of identification i.e., passport, national ID card
– An original, certified copy of proof of address i.e., a utility bill, bank/credit card statement
– An original professional reference
– Completion and signing of our relevant forms pertaining to your proposed structure

Depending on the information and level of details provided on our applications forms, additional information or supporting documentation may also be requested. This is usually required to verify the source of wealth and source of funds information provided.

AML and CFT Regulations – Protection is Paramount

Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) regulations are legal frameworks that help detect and prevent financial crimes. By complying with these laws, we protect our operations and our clients from the risks associated with illegal financial activities.

To do so, we integrate robust measures into our client onboarding process, including ongoing monitoring and the reporting of suspicious activities. These controls are not only regulatory requirements but are also crucial for safeguarding our financial systems and our clients.

Understanding and Documenting Source of Wealth and Source of Funds

Source of Wealth

Source of Wealth (SoW) explains the origin of your entire wealth accumulation.

Understanding this helps us ensure that the assets and funds you bring into our relationship are derived from legitimate means. It looks at how you have accumulated your total wealth over time, including your past earnings, investments, inheritance and any business dealings that have contributed to your current wealth. Examples of source of wealth can include but are not limited to:

– Family wealth
– Inheritance
– Employment income
– Investments
– Business ownership interests i.e., profits
– Lottery or gambling winnings

Source of Funds

Source of Funds (SoF) pertains to the specific funds being used for current transactions. Documenting this is vital to prevent money laundering and to ensure compliance with global financial regulations. Examples of source of funds can include but are not limited to:

– Savings/retained earnings
– Employment – salaries/wages or bonuses
– Share sales and dividends
– Inheritance/gifts
– Company profits
– Pension releases
– Sale proceeds i.e., from the sale of assets such as investments or property
– Lottery or gambling winnings
– Compensation from legal rulings

Source of Funds also relates to the physical source i.e., the name and location of the bank/institution sending funds as well as the name of the individual/entity sending those funds.

Verification

As a CSP, verifying such source of wealth and source of funds is fundamental to our risk-based approach to AML and CFT compliance as it allows us to check the information provided to us is correct and assess any potential money laundering and terrorist financing risks.

When establishing proof of source of wealth, we must obtain information on your net worth, on where said net worth came from and to verify such information on a risk basis.

Below are some examples of ways in which we might verify your source of wealth and source of funds.

– Publicly available property registers
– Online companies’ registries
– Past transactions
– Internet searches
– Payslips
– Bank statements
– Tax returns
– Evidence of title
– Copies of trust deeds
– Company financial statements

Enhanced Due Diligence

If you are a Politically Exposed Person (‘PEP’) or deemed to be a higher risk individual, we will need to undertake enhanced due diligence (‘EDD’).

A PEP is an individual entrusted with a prominent public function such as an Ambassador, a Politician or a Senior Executive within a Government owned company. The risk of a PEP also extends to certain family members and known close associates of the individual.

Adverse Media Searches

During the client onboarding process, we will undertake negative media searches, which are important to identify any adverse or damaging information about you, other individuals or entities that you might be connected to. It involves various media sources including online news, social media, and newspapers and magazines. Such sources will be reviewed and analysed for negative reports or mentions that could indicate a risk such as financial crimes, money laundering, fraud, criminal charges, or other activities that could harm our compliance standing, other clients and subsequently our reputation.

Ongoing Monitoring and Relationship Management

Post-onboarding, our engagement does not just stop at the set-up of your structure. Continuous monitoring and regular communication through our administration services ensure that your needs are met and that compliance is maintained. This ongoing process helps in promptly addressing any potential issues and adapting to any changes in your business environment or objectives. As a part of our monitoring, you may be requested to provide fresh documentation in respect of your identity and/or residential location. 

Regular Reviews and Updates

To remain compliant with changing laws and to continuously improve our services, we conduct regular reviews of our processes. This ensures that our practices remain at the forefront of regulatory and technological advancements, providing you with the best possible service whilst meeting our own regulatory requirements.

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Conclusion

The onboarding process is designed to establish a foundation of trust and security for an ongoing relationship. By understanding and participating actively in this process, you help us ensure that our engagement meets high standards of compliance and efficiency, ultimately protecting your interests as well as our practice.

This structured approach not only makes the onboarding process transparent but also emphasises its importance in protecting both the client and the CSP against potential legal, financial, and reputational harm.