Client Identity Verification
Verify your clients’ identities using reliable, independent sources such as passports or utility bills, ensuring compliance with UK Money Laundering Regulations and preventing financial crime and fraudulent activity.
AML Essentials Kit Breakdown:
Confirming the identity of your clients is a legal obligation under UK Money Laundering Regulations. It requires you to establish, using credible and independent evidence, that the person or organisation you are dealing with is genuinely who they claim to be.
This obligation applies to the client itself and to anyone connected with that client who exercises ownership, control or significant influence. That includes directors, beneficial owners, trustees, partners and others in positions of authority.
Understanding the requirement
Identity verification is more than a procedural formality. It is a practical defence against fraud, financial crime and regulatory exposure. When done properly, it allows your firm to identify suspicious patterns of behaviour early, avoid unnecessary risk and protect both your reputation and your clients.
Failing to verify identity, or doing so inadequately, leaves your firm vulnerable to enforcement action and can result in you unwittingly facilitating money laundering or terrorist financing.
Carrying out verification checks
The way you verify identity should be proportionate to the level of risk presented by the client and the type of work you are undertaking. You may use traditional document-based methods, electronic tools or a combination of both. Whatever approach you take, the evidence you rely on must be independent of the client and sufficiently reliable to meet regulatory standards.
When verification must take place
You must complete identity verification before you establish a business relationship with a client. This applies to ongoing engagements and to one off transaction such as company incorporations or advisory work that does not lead to a continuing relationship.
Who must be verified
Your verification obligations extend to:
- The client, whether that is an individual or an organisation
- Any individual who owns or controls the client
- Individuals who have significant influence over the client’s activities or decision making
In practice, this means verifying directors, shareholders with more than 25% ownership or voting rights, partners in a partnership, trustees and settlors of trusts, and anyone else who holds a position of material control. Each of these individuals must be subject to the same level of scrutiny as the client entity.
Methods you can use
There are various ways to verify identity. Your choice of method will depend on your client base, the volume of work you handle and the systems you have in place. Common approaches include:
- Conducting a face-to-face meeting with the individual
- Inspecting original documents such as a passport or photocard driving licence
- Confirming the individual’s residential address using recent utility bills, bank statements or council tax correspondence
- Using electronic verification services that cross reference information against credit reference agencies, the electoral register or public records such as Companies House
- Deploying biometric technology, including facial recognition systems that match a live image to official identity documents
Some methods are better suited to high volume practices, while others work well for smaller firms with more direct client contact. The key is ensuring that whichever method you use delivers evidence that is both independent and reliable.
What a credible verification tool should provide
If you choose to use a digital identity verification service, you should satisfy yourself that it meets the following standards:
- It accesses multiple independent and current data sources
- It produces a clear and auditable result for each check
- It maintains a full record of the verification process
- It complies with UK data protection requirements and stores information securely
What can go wrong
There are several common errors that firms make when verifying identity. Being aware of these pitfalls can help you avoid them:
- Taking documents at face value without verifying their authenticity or checking whether they are still valid
- Skipping verification for clients who seem familiar, local or low risk
- Assuming that any electronic verification tool is automatically compliant without reviewing its methodology or outputs
- Relying on identity checks carried out by another firm or adviser without reviewing the underlying evidence yourself
- Failing to repeat verification when there is a change in the ownership, control or structure of a client
Your firm is ultimately responsible for ensuring that verification is adequate, even if you use third party tools or rely on checks carried out elsewhere.
Your compliance checklist
Client identity verification sits at the heart of effective AML compliance. It is not simply a regulatory obligation but a safeguard that protects your firm, your team and the wider financial system.
To remain compliant, you must:
- Complete all identity verification before commencing any work
- Use evidence that is genuinely independent and sufficiently reliable
- Verify connected individuals with the same rigour as the client entity
- Screen every client and connected person against sanctions lists
- Maintain a clear and accessible audit trail of all checks
- Take full responsibility for the adequacy of verification, regardless of whether it is conducted in house or by a third party
If client circumstances change, such as a new director being appointed or a change in beneficial ownership, you must update your verification records accordingly.
Frequently Asked Questions
When do you need to verify my identity?
We must complete identity verification before we start any work for you. This applies whether you are engaging us for ongoing services or for a single transaction such as setting up a company or providing specific advice. We cannot begin the relationship until verification is complete, so it is best to provide the necessary information and documents as early as possible.
What if my passport or driving licence has expired?
We need to see valid and current documents. An expired passport or driving licence is not acceptable for identity verification purposes. If your identity documents have expired, you will need to renew them before we can complete the verification process. We cannot proceed with out-of-date documents, even if you are otherwise well known to us.
Why do you need to verify people connected to my company, not just the company itself?
We are required to verify anyone who owns, controls or has significant influence over your company. This includes all directors, anyone who holds more than 25% of the shares or voting rights, and anyone else in a position of authority. The reason is that companies can be used to hide the true identity of individuals involved in financial crime. By verifying everyone with a material connection to the company, we can understand who is really behind the business and ensure we are not dealing with anyone who poses a risk.
What happens if I do not provide the documents, you ask for?
If you are unable or unwilling to provide the information and documents we need, we cannot proceed with the engagement. This is not negotiable. The law requires us to verify your identity before we begin working with you, and we have no discretion to waive this requirement. If verification cannot be completed, we must decline to act.
Why do you need to verify people connected to my company, not just the company itself?
We are required to verify anyone who owns, controls or has significant influence over your company. This includes all directors, anyone who holds more than 25% of the shares or voting rights, and anyone else in a position of authority. The reason is that companies can be used to hide the true identity of individuals involved in financial crime. By verifying everyone with a material connection to the company, we can understand who is really behind the business and ensure we are not dealing with anyone who poses a risk.
AML Essentials Kit Breakdown:
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