New compliance regulation in Colombia calls on companies to verify clients and providers information
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New compliance regulation in Colombia calls on companies to verify clients and providers information

02 September 2014

New regulation in Colombia introduces the Know Your Client (KYC) principles to the country's business environment to combat money laundering and other illegal activities.

Our local compliance expert looks at why KYC is important, and what you need to be aware of to be in compliance.

Companies are doing more international business with providers and clients around the world without verifying if the company is truly who they say they are – and, quite simply, putting that company’s reputation at risk.

Implementing compliance procedures is key to managing business reputation in the market, as well as helping to assure the construction of a healthy relationship and maintain a long-term business relationship.

Some of the most common risks that companies face due to the lack of compliance procedures include the threat of confronting a legal or civil action, as well as a negative brand image and reputation, even the winding-up of the business.

Know your client (KYC) is an international standard that companies can implement to help mitigate such risks. The “Know” implies a due diligence to any client, provider or company determining a risk level and also helps to prevent involvement in fraud, money laundering and terrorist financing.

Colombian legislation to prevent illicit activities

A recent norm issued by Superintendencia de Sociedades in Colombia (External newsletter 304-000001) makes mandatory the implementation of internal corporate procedures to help ensure companies are aware of risks of money laundering and terrorism financing activities. All companies that registered revenue in 2013 of more than 160,000 pesos in minimum monthly wages (approx. USD 47m) must report periodically the corporate procedures they have been managing.

Compliance software doesn’t always work

Some organisations think using the most updated software will efficiently identify the information of their clients and suppliers in a quick and easy way. Software searches the data in the main lists such as Clinton or US OFAC, but these are not the only lists to search. You will also require an expert to analyse the information and to determine the safety of working with the company in question.

It is important to undertake periodic checks on existing clients and suppliers, as well as ensuring you are familiar with the local legislation; this will help you to comply with any locally-required reports and show you are working within the parameters for prevention of money laundering, fraud and terrorism financing.

Find out more about Know Your Client procedures in Colombia

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Written by

Maria Arango

Compliance officer, Colombia

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