KYC/AML
KYC/AML refers to “Know Your Customer” and “Anti-Money Laundering” processes used to verify investor identity and prevent illicit finance.
Allocator relevance: A required onboarding and compliance step—failure delays or blocks allocations regardless of investment fit.
Expanded Definition
KYC/AML includes verifying identities, beneficial owners, source of funds, and sanction screening. For funds, it ensures compliance with regulations and protects reputational integrity. For allocators, KYC/AML readiness affects operational speed, especially for complex ownership structures (trusts, holding companies, SPVs).
KYC/AML requirements vary by jurisdiction, fund administrator process, and investor type.
How It Works in Practice
Investors provide documentation (entity docs, IDs, ownership charts). Administrators or compliance teams run screening and maintain audit trails. Updates may be required periodically or upon material changes.
Decision Authority and Governance
Compliance holds veto power. Governance defines documentation standards, escalation for exceptions, and how beneficial ownership is maintained and refreshed.
Common Misconceptions
- KYC/AML is a one-time check.
- Large institutions are automatically cleared.
- KYC/AML is purely administrative and doesn’t affect timelines.
Key Takeaways
- KYC/AML is a gating process with real time impact.
- Complex structures require more work—plan early.
- Beneficial ownership mapping is central.