A Quick Guide to KYC Compliance in Colombia

When you know who you’re doing business with, you’re less likely to put your investment at risk. This is the logic behind Colombia’s know-your-client or know-your-customer (KYC) compliance, which forms part of the country’s anti-money laundering (AML) requirements and initiatives against illicit activities.

Here’s what you need to know about performing KYC compliance for your business. 

Customer due diligence is essential

Customer due diligence (CDD) is one of the most important compliance procedures your business will perform concerning KYC. This is the process of vetting your clients and customers in line with the country’s LAFT policies. LAFT is a Spanish acronym translating to Money Laundering and Financing Terrorism. 

How to perform KYC

Any entity governed by the Superintendency of Finance must have a KYC process in place that mitigates Money Laundering/Terrorism Financing (ML/TF) risks. 

Performing KYC correctly entails: 

  • Identifying your clients: Check names, addresses, and other data points against official identifications and have IDs validated for authenticity. Official ID documents include passports and citizenship cards. Proof of residence can be made using official documents like bank statements and utility bills that bear the client’s address.  
  • Investigating economic activity: Research customers’ and clients’ funding sources with an eye for inconsistencies. Where do income and expenses originate? Of what nature are the income and expenses? Financial information can be gathered from bank statements, credit histories, and other official documents bearing transaction histories. 
  • Researching existing and future clients: Don’t only vet future customers but the ones you currently have, monitoring their financial activities throughout your time working together.

Starting a new client relationship

Before establishing a contract with a new client, your business must fill out a form with the name, ID number, birthplace, economic activity, company type, monthly income and expenses, asset origins, total assets and liabilities, and other requirements detailed in section 4.2.2.2.1.3 of the Basic Legal Circular of the Superintendency of Finance

Gather information by performing an in-person or remote interview with the to-be client (some entities, like financial institutions, can use facial recognition technology to vet customers). Verify information by making sure that the client’s transaction history aligns with the nature of their operation. 

After the initial vetting procedure, keep tabs on the client’s operations, identifying any unusual or suspicious transactions. Training your employees on compliance is essential to identifying potential issues, and it’s important for Colombian businesses or foreign branches to have solid internal risk mitigation procedures.

Invest in Colombia wisely with expert guidance

Avoid compliance issues and the resulting fines and sanctions with professional investment advising. LaGrande Global can help you correctly navigate the lucrative Colombian market and the local rules of engagement.