KYC explained: how onboarding works

KYC — Know Your Customer — is the heart of every anti-money-laundering safeguard. It is not a form to be signed in a hurry when the relationship is opened: it is a structured process that accompanies the business relationship from beginning to end. Anyone who treats it as a formality finds out at the first AMLA audit. Here is how the onboarding of a client at a Swiss financial intermediary really works.

Why KYC exists

The Anti-Money Laundering Act (AMLA) requires the intermediary to know who it is working with and where the funds come from. The aim is to prevent the financial system from being used to launder money or finance terrorism. KYC translates this aim into operational steps: identify, establish, profile, monitor.

Step 1 — Identifying the client

The first step is to identify the contracting party. For a natural person, name, date of birth, nationality and address are collected and verified on the basis of a valid official document. For a legal entity, the company name, registered office, entry in the commercial register and who holds the power of representation are verified.

Identification can take place in person or remotely, using recognised digital procedures (video identification, document verification, reference transfer). Online onboarding is permitted, but it follows precise rules: doing it “casually” is one of the most common mistakes.

Step 2 — Beneficial owner

Behind a client there is almost always one question: who is really behind it? The intermediary must establish the beneficial owner (BO), that is, the natural person who ultimately controls the assets or the company.

• For operating legal entities, this means tracing back to the natural persons who hold control (significant shareholdings or de facto control).
• For asset-holding structures (trusts, foundations, vehicles), the founders, beneficiaries and those who exercise control are identified.

This step prevents corporate screens from concealing the real owner. It is also the point where onboarding most often becomes complicated, when the control chain is intricate or cross-border.

Step 3 — Purpose and origin of funds

Having identified the who, the focus shifts to the why and the where from. The intermediary reconstructs the purpose of the relationship and the origin of the assets: professional activity, the sale of a business, an inheritance, investment income. The information must be plausible and consistent with the client’s profile. An inconsistency between declared income and the assets being moved is a classic warning sign.

Step 4 — Risk profile

With these elements, the risk profile of the relationship is built. Factors that weigh in include:

• the client’s country of residence or activity;
• the presence of politically exposed persons (PEPs);
• the economic sector and the nature of the transactions;
• the channels and instruments used, including virtual currencies.

Relationships classified as high risk require enhanced clarifications and, often, management approval before proceeding.

Step 5 — Ongoing monitoring

KYC does not end when the account is opened. The relationship must be monitored for its entire duration: transactions must remain consistent with the profile, data must be kept up to date and anomalies must be clarified. Where there is a well-founded suspicion, the obligation to file a report with the Money Laundering Reporting Office (MROS) is triggered. This turns KYC from an initial snapshot into a living process.

Typical onboarding mistakes

• Incomplete documentation: identification carried out but the BO not established.
• “Default” risk profile: everyone classified as low risk, without any real analysis.
• Generic origin of funds: “savings” is not a verifiable answer.
• No updates: dossiers frozen at the opening date, data no longer current.
• Improvised digital onboarding: tools that do not comply with the rules on remote identification.

Each of these points is exactly what an AMLA audit looks at first.

How we set it up

A good KYC framework is proportionate: rigorous where it matters, lean where risk is low, so as not to burden the onboarding of good clients. SIH ONE handles structuring and advisory: we design onboarding procedures, questionnaires, the risk matrix and documentation flows, with staff training. Our team has direct experience as AMLA Compliance Officer, so we build safeguards that genuinely withstand scrutiny, not just on paper. Activities subject to authorisation, where applicable, go through authorised partners.

Do you want a solid and sustainable KYC process for your business? Let’s talk: we define procedures and tools suited to your real level of risk.