How do I weigh compliance costs, such as conducting comprehensive KYB vetting with UBO identification, against the risks of non-compliance?
You should weigh the costs of compliance against the risks of non-compliance. While being compliant with regulations may require you to carry out a complete “Know Your Business” vetting with ultimate beneficial owner identification, the cost of these procedures is likely less than the cost of the alternative. Non-compliance brings significant financial penalties or even conviction for criminal activity. There may also be other consequences to consider, such as damage to your business’s reputation. At worst, you may lose your business. The potential risks often outweigh the cost of compliance.
In addition, consider the benefits that come with compliance. Conducting thorough KYB vetting with UBO identification can help your company protect itself from being used to facilitate money laundering and other financial crimes. This can not only help your company avoid potential penalties, but it can also help protect your company’s reputation and maintain the trust of its customers and other stakeholders.
Look at it this way: compliance costs are an investment in your company’s long-term stability and success. By taking the necessary steps to comply with regulations, your company can protect itself from potential risks and position itself for success in the future.
Why do we stress the importance of having an audit trail or audit-proof documentation regarding KYB and vetting for sanctions, trade embargos, reputational risks, and politically exposed persons (PEP)?
An audit trail, or audit-proof documentation, refers to a complete and accurate record of your company’s financial transactions and activities. An audit trail is essential regarding Know Your Business (KYB) and vetting for sanctions, trade embargoes, reputational risks, and PEPs because it can provide evidence of your company’s compliance.
In the case of KYB, an audit trail can help your company demonstrate that it has conducted due diligence on its operations and business partners and has identified and addressed any potential risks. This can demonstrate your company’s compliance with anti-money laundering and other regulations, such as Sanctions and the German Supply Chain Due Diligence Act.
In the case of sanctions, trade embargoes, and PEPs, an audit trail can help your company demonstrate that it has not engaged in transactions with individuals or entities subject to these restrictions. This can be important for avoiding potential financial penalties and other consequences.
Additionally, having an audit trail can help your company protect its reputation by providing evidence that it has conducted its business ethically and responsibly. This can be important for maintaining the trust of customers, investors, and other stakeholders.