5 Reasons Why AML and KYC Is Important to Your Business

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Have you ever wondered why it is important for coworking spaces to do background checks and due diligence on prospective coworkers? Well, we are here to tell you that coworking has gone so mainstream, even bad actors see the benefits of coworking. Coworking spaces can become a breeding ground for illegal activity if the owner isn’t careful. It can even happen right under their noses without even knowing. Especially since the coworking movement was born out of an ethos of trust and transparency, many space owners are not alert to the darker side of international trade. . 

Anti-Money Laundering (AML) and Know Your Customer (KYC) are important due diligence tools to ensure the best possible outcome for your business and  also for your coworkers. There are many reasons these checks are important when onboarding clients. 

In Europe it has been required for businesses within the coworking sector  to do these checks when onboarding new clients. This is to help to ensure that money laundering schemes and other illegal practices are caught before they are implemented into an organisation. The coworking sector serves as a gatekeeper for our own communities and for society as a whole in this sense.

There are five main reasons why AML and KYC checks are important: they ensure the best due diligence, best clientele, prevent fraud and terrorist financing, and help  safeguard your community – and your company’s reputation. 

Best due diligence

Investopedia identifies due diligence as: “an investigation, audit, or review performed to confirm facts or details of a matter under consideration…. due diligence requires an examination of financial records before entering into a proposed transaction with another party.”

Due diligence is important for the coworking sectors and therefore the principles of KYC exist. KYC stands for “Know Your Customer” and when KYC checks are done, they focus on these aspects: 

  • Identify the client
  • Verify the client’s true identity 
  • Understand the client’s activities and source of funding
  • Monitor the client’s activities

These checks are done to ensure that the client who is being onboarded is who they say they are, has the appropriate background, and will not cause harm to the business in any way, be it due to their business practices or because of a security risk. 

AML checks are just as important and focus on identifying and preventing fraud. Depending on jurisdictions and regulations, AML procedures can involve document gathering such as business registration documents, shareholder information, and the like.

Best clientele

When AML and KYC checks have been completed and you are happy to onboard the client, you  can rest easy knowing that your have onboarded the right type of client. The checks ensure that your business can operate with ease and peace of mind, but also that other clients can rest assured knowing that their coworking space is fraud and money laundering free. 

When a company takes AML and KYC seriously it takes its time when doing these checks, sometimes it can take a while, but in the end it is worth it. So, next time you are asked for a mountain of paperwork and identification documents, just know that the business is ensuring that you are a safe client to have. 

Prevents fraud

There are a multitude of scammers in the world  and it is their full time job to get their hands on money, or data, or whatever they are seeking. This is why AML and KYC checks are put in place, to prevent these criminals from carrying out their fraudulent activities under your  company’s name. 

Sometimes just the mention of AML and KYC can scare away a scammer. However, more times than you might think, these scammers are willing enough to submit their documentation. This is how fraudsters are identified and if anything looks suspicious or out of the ordinary the business has the right to show the applicant the door. 

Prevents terrorist financing

It might seem that the AML and KYC checks are unnecessary and a waste of time, but when done the correct way, these checks can actually prevent terrorist attacks. Terrorist groups have to get their money from somewhere also and a surprising number are supported by legitimate appearing businesses. Throughout the world there are also many cyber attacks on coworking spaces and some of them can even occur from the inside. 

When coworking spaces take KYC and AML checks seriously, they can do their part to prevent these attacks. This means that when they have performed their due diligence, they can say with some certainty that their clients weren’t the ones that caused or initiated the attacks. 

Guards your community 

Performing these due diligence checks offers not only security for your company, but it also offers you the ability to guard your community and your company’s reputation. When you ensure that only confirmed clients are onboarded, and that you comply with all AML and KYC regulations, you can ensure security for your brand’s image. Your coworkers don’t have to worry that the person sitting next to them is engaged in distasteful or illegal activities. 

There will be many clients who feel that sharing their personal information isn’t necessary, however, stick to your ground and make sure that you follow your regulations and the due diligence regulations of your country. 

When coworking spaces make use of proper AML and KYC checks, they can safeguard their reputation, but they can also ensure a safe environment for their clients and users. When the best possible clients are onboarded it creates a safe space where everyone can make use of the cowork space without the fear of having criminals next to them.

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