When you implement KYC/AML verification in your process, most investors will pass smoothly within seconds. However, some investors may be flagged as potential risks—either because they present a legitimate concern or because they are what we refer to as a “false positive.”
In this article we'll cover some important things you should know about false positives, how to handle them and best practices you should look into implementing to streamline the verification process of flagged investors.
IMPORTANT:
InvestNext’s KYC/AML verification is a risk assessment tool designed to help you screen investors, but it is essential that your organization has its own policies and procedures in place for handling potential risks. Work with your legal council if you have any questions about the suitability of an investor for your project or organization.
To manage potential false positives, InvestNext recommends your organization create a plan for validating potential false positives, financial watchlist matches, or Politically Exposed Persons (PEP) matches.
How to Manage a Potential False Positive
While InvestNext’s KYC/AML feature will flag any elevated risk potential, it is the sponsor’s responsibility to evaluate the assessment to decide if the risk is real or a false positive.
If it is a false positive, you are able to document this in the portal to keep a record of when/who/why someone was verified after being rejected for a match.
Evaluating an Assessed Match
The KYC/AML verification is completed through four components:
ID verification
Watchlist screening
Politically exposed persons checks (PEP)
A biometric liveness check
InvestNext’s KYC/AML will flag any investors that potentially have a higher risk profile.
NOTE: Not all potential matches are necessarily issues/problems. However, they are all flagged to allow you to thoroughly review and evaluate.
Once you are notified of an assessed match, use the KYC/AML assessment report for that investor to review any flagged questions in the report.
STEP 1: Go to the Accounts section
STEP 2: Click into the details for the investor's Account
STEP 3: Click on the line item in the KYC/AML tab and click on the View KYC Report document.
STEP 4: Review the assessment report.
For example, the investor in this report has submitted an ID image that appears to be edited:
Scroll down to the items marked as Rejected and review:
NOTE: The assessment report will also have links to the resource (watch lists, etc.) that were used to determine if this is the person in question.
Click the links to review the source information and determine if this is the same person.
STEP 5: Use the questions below as a guide to help evaluate an assessed match:
Does the assessed match in the report have the same name as your investor or names they have been known by in the past?
Do your investor and the assessed match share a common name?
Does the assessed match share the same Date of Birth (DOB) as your investor?
Does the assessed match come from a country your investor has no affiliation with?
Is the match due to something that is not necessarily criminal (such as holding a political position - being flagged as a political person)? If so, you should confirm that there is no entanglement between their public service and the project and confirm that they are legally allowed to participate in the deal.
Determine what is permissible under your own terms and disclose those terms to your investors.
STEP 6: After completing your evaluation of the assessed match, in the KYC/AML Details screen, you can choose one of the following actions:
Click Put in Retry to allow the investor to retry their verification. The system will send the investor a notification email with the link to complete the KYC/AML check again.
Click Set to Approved to manually set their verification to Approved.
Leave the assessment as Denied (Failed). No further action needed.
For Manual Approvals:
If you have chosen to Manually Approve the KYC Request by clicking Set to Approved:
If you have not done so yet, Review the KYC Document and then click the Set to Approved button:
2. Enter your comments into the Approval Comments. Explain why this KYC is being approved field.
3. Click the check box to confirm you have taken reasonable steps to review this KYC application.
4. Click the Set to Approved button:
5. The Investor's KYC/AML tab will show that the investor now has a status of Accepted.
When you click into the KYC/AML Details screen, you will see the reason that the KYC was denied and you will also see an Accepted status
Under the KYC EVENTS section, you will see the manual change of Status and the reason provided:
IMPORTANT FAQs:
If an account is rejected, can the investor's commitments and funds be manually recorded as received in InvestNext?
Yes. Sponsors can manually record commitments and an investor's funds if their account is rejected. However, the investor cannot proceed further in the Commitment workflow if their KYC is rejected.
Sponsors choosing to complete their investor's commitment will need do so outside of InvestNext and manually record the commitment and funds in the portal.
Is there a KYC/AML link that the sponsor can copy and send to the investor?
Yes. When the KYC/AML verification is "In Progress", a link is available at all times by going to the KYC/AML Details screen:
NOTE: The link will no longer display when the verification is completed or Accepted.
ADDITIONAL RESOURCES: