Payment framework and obligations of payment service providers
An authorized e-money institution offers the ability to store money as well as perform online operations and transactions such as payments and bank account transfers. Its contribution is essential in the ease of carrying out these transactions on a daily basis and in their speed, especially since the institution of electronic money is subject to important regulations regarding the security of transactions. A simple explanation of KYC, see this article.
Current European payment rules
The issue of combating money laundering and terrorist financing has been of concern to payment service providers since the October 26, 2005 directive. All the proposals were considered and then repealed by the 4th Anti-Money Laundering Directive, known as Directive 2015/849. They are in the process of being transposed in the European Union countries. Other directives have been added to the legislative arsenal for payment service providers, such as the Payment Services Directive (PSD2), which is currently being transposed in Europe. Finally, note the date of September 16, 2009, when the Electronic Money Directive (2009/110/EC, known as DME2) was ratified, the transposition of which was completed in UK on January 29, 2013.
KYC procedure
The KYC (Know You Customer) procedure consists of verifying the identity of customers and ensuring that customers comply with applicable anti-corruption laws. This review also covers the integrity and probity of the client in the context of anti-money laundering and countering the financing of terrorism, as well as in the context of combating financial tax evasion and preventing identity theft.
Therefore, an e-money institution has to collect and analyze multiple data, so customers are kindly requested to issue multiple types of documents. Among these documents for a natural person we find a copy of a valid identity document and proof of address issued less than 3 months ago, and for a legal entity - a Kbis extract issued less than 3 months ago, a copy of the statute, a document confirming the identity of the legal representative , etc.
KYC application thresholds
An electronic money institution must apply KYC procedures if the transaction amount exceeds 250 euros or when the transaction amount exceeds the threshold set at 2,500 euros for the purchase of services or goods during a calendar year. Similarly, if the level of payments to the customer's bank account reaches more than €1,000, the external payment provider must carry out an accurate verification of the user's identity. Below this, the risk is considered lower, which does not lead to the systematic opening of the KYC procedure. What is KYC and why it is important, you can learn from this link.
PEP check
Payment providers are also required to check lists of political figures or those registered on sanctions lists. Currently, European regulations are being developed on issues related to the fight against money laundering and terrorist financing. What European authorities are primarily looking for through the introduction of such legislation for regulated payment players is increased vigilance of financial flows and better customer identification.