When you start cooperating with Aaroni Accounting Services, we ask you to go through the AML and KYC background check. We collectively refer to these as due diligence measures. This request is not due to our curiosity, but stems from legal acts, because Aaroni Accounting Services is an obliged entity under the Money Laundering and Terrorist Financing Prevention Act (MLTFPA).
The obligation to conduct AML and KYC checks actually lies with many companies and organizations, including:
- credit institutions;
- financial institutions;
- organizers of gambling, except for commercial lotteries;
- persons who intermediate the purchase or sale of real estate;
- sworn auditors when providing audit services and providers of accounting services;
- providers of advisory services in the field of accounting or taxation;
- providers of trust and company services;
- etc.
See the complete list in Money Laundering and Terrorist Financing Prevention Act.
Briefly about AML and KYC concepts. Anti-Money Laundering (hereinafter AML) means a legally regulated international system and practice aimed at preventing money laundering, terrorist financing, and other financial crimes. Know Your Customer (hereinafter KYC) is part of this process and means that providers of certain services (listed above) must verify and validate the client’s identity and beneficial owners before starting cooperation.
All laws, regulations, and standards governing the AML and KYC processes are created to ensure the entire system remains integral and reliable, both in Estonia and internationally.
Why must Aaroni Accounting Services OÜ apply due diligence measures?
As already mentioned above, Aaroni is an obliged entity under the Money Laundering and Terrorist Financing Prevention Act. This means that it is not an optional approach, but we have a statutory and unavoidable obligation to check our clients before starting cooperation, because:
- we offer accounting services (MLTFPA § 2 lg 1 p 7);
- we provide trust and company services (MLTFPA § 2 lg 1 p 9).
What is the purpose of due diligence measures?
The purpose of AML and KYC is not to look for culprits or automatically assume the worst about new clients. The goal of these processes is to:
- understand with whom we are starting a business relationship;
- assess whether the client’s activity and background fit Aaroni’s risk tolerance;
- decide whether our potential business relationship is permissible and reasonable.
AML is essentially a broader framework that includes:
- rules and procedures to prevent the channeling of “dirty” money into legal transactions;
- measures that identify and report suspicious financial activity;
- international cooperation.
KYC, in turn, is the so-called proactive part of the whole process, during which the obliged entity, i.e., the service provider, identifies and confirms the client’s identity, the company’s ultimate beneficial owners (UBO), and, if necessary, the origin of the funds before the business relationship is established. KYC is not recommendatory, but a necessary and mandatory part of the AML risk identification process.
Furthermore, passing the KYC process does not automatically mean that all checked persons will necessarily become Aaroni’s clients. The background check may also reveal that the risks are too high or that a business relationship is not permitted by law. Decisions based on this are also part of responsible business conduct.
If I have passed the AML and KYC background checks, does this give my company some kind of guarantee mark?
The simple answer is no. If our potential client has passed the initial background check, it means that:
- at the given moment, the client meets Aaroni’s risk tolerance;
- the business relationship is permissible and can be started.
However, this is not a guarantee for future cooperation. The law obliges us to monitor our clients throughout the entire client relationship, which means:
- repeated background checks;
- transaction monitoring;
- continuous financial sanctions check regarding the client and persons related to them
What is the benefit of all this for my company?
For the client, the main value of our background check lies in legal certainty, because correctly implemented due diligence measures mean that Aaroni operates lawfully and transparently as a service provider, our business relationship with the client is built according to the rules valid both in Estonia and Europe, and all possible future financial risks should be well mitigated.
Therefore, this is not just a “check,” but in a sense, a protection and trust instrument for your company. For example, if someone should ever raise questions about your company’s business transactions, you can point out that you have undergone a correct AML process. This is a real business advantage and could increase your credibility in the eyes of clients, partners, and credit institutions.
If you have any questions about the prevention of money laundering and the application of due diligence measures, contact us.
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