You’ve got to Know Your Clients

22 Dec, 2023
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Ahmed Elnaggar

Founder, The Jurist, Managing Partner at Elnaggar & Partners, Founder and President at Emirates Legal Network

Let's remind everyone of the crucial concept of 'Know Your Client' (KYC) procedures in business transactions. This practice is not just a formality; it's a fundamental aspect of building trust, ensuring legality, and safeguarding your business interests.

In the absence of adequate knowledge about your customers and clients, you're essentially navigating your way in the dark. There's a lack of accountability, which can lead to several serious problems. Imagine completing a project, investing time, effort, and perhaps even money, only to find out you won't be compensated. Worse, your hard work might be used unethically, perhaps even in activities that contravene legal or moral standards. You end up with the results delivered or your work in the hands of someone that you do not know.

Consider a graphic designer who takes on a project for a new client. Without proper KYC checks, the client's identity and creditworthiness remain unverified. The project is completed, accepted, and maybe delivered, but the payment never arrives. The designer, lacking the necessary client information, faces hurdles in legal recourse or debt collection. This scenario, unfortunately common, highlights the tangible risks of inadequate client knowledge. This is not a hypothetical scenario. As they mark on Netflix shows: "Inspired by True Events".

Make sure you collect at least the below documents from your new clients:

For Individual clients, you should at least collect a proper identification document like a Passport copy. Make sure it is clear, colored, and scanned. This will make it easy to identify your customers and to check them in your own country and even beyond.

In case you are dealing with a corporate client you should request the Company Registration Documents. These are foundational in establishing a company’s legal existence. Examples of documents to be requested are the business license, documents Identification of authorised Representatives, and proof of address which is a first step in verifying the operational base of the business.

This is just an example of the least to ask for.

The implications of not knowing your client extend beyond financial losses. In today's regulatory environment, businesses are expected to play a role in preventing money laundering, fraud, and other illicit activities. By conducting thorough KYC checks, you're not only protecting your business but also contributing to a larger legal and ethical ecosystem.

As you proceed with various business endeavors, prioritize KYC procedures. They are not just a regulatory requirement but a shield that protects your businesses from potential financial and repetitional harm. Remember, knowing your client is not about suspicion; it's about smart business practice.

 

Ahmed Elnaggar

Managing Partner 
Elnaggar & Partners

 
 
 
 
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