February 27, 2013

Know Your Customer: A Safety Valve for Your Investment

Whenever the investor is out to take a call from the borrower, it is obvious for him to get the goose bumps. Who the investor is dealing with is one of the most important questions that need to be answered before it is too late. There are certain rules to the contract that involves a borrower and a lender and clear identity of the borrower is the first and foremost requirement of the contract. The money can never be thrown in a blind well even if it is available in plenty. The improper check of the loaner may make the lender a culprit of a very heinous crime in the long run and therefore knowing each and everything about the loaner is one of the prime responsibilities of the lender.

The following tips more or less safeguard the money-related ventures in your life.

Prevention of Scams

The complete knowledge about the borrower can be instrumental in preventing the financial scams from hitting the economy. The unrealistic returns promised, investments made in fake names, payments made to imposters are some of the unpleasant situations that may occur if the necessary checks on the background of the borrowers are not made. These situations may give rise to a series of scams that ultimately hit a country’s economy very badly.

Therefore, establishing the true and complete identity of the borrower is one of the most responsible actions expected from the lender. The one lender- many borrowers system like that in a bank increases the responsibility manifold and therefore, there are certain documents that are considered mandatory by the banking authorities. These documents, for example, identity cards issued by Income tax department, government authorities and driving license etc are considered to be the identifying documents for the customers.

Prevention of Terrorist Funding

The occurrence of the most heinous crimes in the recent history of USA was found to be the result of incomplete KYC checks. The execution of most dreadful plans by terrorists could never have been possible in the absence of uninterrupted flow of funds. And this funding, on carrying out deeper investigations, was found to be the result of negligence of KYC norms. Hence, KYC check is supposed to be very serious business and executives found negligent in doing so may face the punishments as well as loss of jobs. No lender would ever like to deal with anti-social elements directly or indirectly; and this can be achieved only by respecting the sanctity of KYC checks.

Lender–borrower relationship needs to be clear and transparent and this transparency is possible by carrying out the KYC checks. KYC check does not mean finding out where your customer resides; it, in fact, involves finding out all pertaining to profession, income source etc of the customer.

Anti-money Laundering Check is Equally Important

People do not like paying huge income taxes. They do every possible thing to evade taxes and in doing so, they take the help of a series of hands to deviate the attention from the origin of funds. The money changing hands frequently and unnecessarily may also result into loss of revenue that ultimately hampers the development process of the country.
21st century is all about performing a complete research before you spend in a single dime either for purchase or any investment. The catalyst in the entire process is the online user reviews that are present literally in almost all alcoves. This practice would not only discourage scams in society but also normalize your incoming days without undergoing suffering.

Richard is a known expert on performing mergers and acquisitions. His experience on finance and insurance niches helps him render effective solutions to your financial woes. For better understanding, you can reach him through his websites.

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