As businesses step into the new decade, business owners and compliance managers are focusing on the risks of identity theft, AML, and ATF regulations, and preventing the misuse of ecosystems (financial and otherwise) for non-compliant activities and regimes.
This primarily brings attention to the start-point of business operations – customers. This focal point changes its narrative and takes various shapes per the industry in which the business is established. Be it customers, clients, entities, vendors, and other kinds of profiles. Today, the focus shifts towards vetting investors prior to onboarding to ensure systemic regulatory compliance.
The following will discuss in detail how identity verification is changing the way businesses are getting their investors and the protocols followed to assess investor risk and ensure compliance.
Tax and Financial Compliance
Investor vetting in the tax and financial compliance context seems to be the primary focus for businesses. It’s not just about validating the identities of the investor anymore but conducting due diligence to ensure that the source of funding is also legitimate.
TIN Matching, SSA Search, SOS Entity check, OFAC watch list checks, and other due diligence procedures have become the norm, wherein the complete financial, business and tax compliance history of the investor is screened thoroughly.
Civil Compliance
Apart from screening a profile for the standard criminal history records, business intelligence has evolved to help the investor understand the civil risks and liabilities the investment and the investor could bring in.
For example, funds gathered through non-compliant activities, such as drug trafficking, money laundering, or other off-limit regimes are often monitored by federal agencies. These funds, once they reach the investee’s account, could transfer the risk of civil liability from the investor to the investee.
Unaccounted cash transactions could bring in the risk of tax evasion and money laundering charges against the investee, putting your business on a hotspot and imposing reputational losses.
Business Compliance
Every business wants investments from a profile or an entity that has a clean record of business with little to no controversies, legal issues, and regulatory risks. Validating a profile against the OFAC data lists, SOS entity search data lists, consolidated sanctions, and other variants of due diligence checks will enable investees to identify, validate, and verify the credibility of the investors and the investment funding.
Adverse Media Screening
An important segment of focal identity verification regimes is to screen a profile against any adverse media coverage, controversies, and bad PR.
Primary reasons for this verification check include:
- Assessing the first-hand involvement of the investor in the economic crimes, fraud, and other legal prosecutions
- Understanding the severity of the allegations put against the profile
- Assessing the goodwill and reputational liabilities of onboarding high-risk profiles
- Verifying if the media coverage was a repercussion of competitive jeopardy
The reasoning will vary for each case, enabling businesses to validate the profiles per the unique identification parameters.
Sanction Screening
Probably the most important procedure in the enhanced due diligence process; high-risk profiles are validated against the authorized sanction records of the federal and international agencies.
This enables you to vet the investor profile for possible connections and recorded history of engagement in prohibited or restricted trade activity, money laundering, terrorism financing, and active engagement with designated terrorist organizations and groups.
Onboarding high-risk profiles could impose unrequited scrutiny, civil penalties, violation charges, legal prosecution, prohibited operations, and even imprisonment for your entity and its officers.
If you’re eyeing a good investor for your business but unsure about their history and compliance background, you can start with some simple identity verification checks and accelerate your identity verification experiences as you find interesting leads and insights.
Check out TIN Verify identity verification checks for real-time investor vetting results
Check as many as 100,000+ profiles in just a few minutes per the official records.
