Navigating Know Your Client procedures in the superyacht industry

19th August 2023
Know Your Client (KYC) procedures have been applied in the superyacht industry for over 10 years, but recent world events have put them back in the spotlight.

To comply with regulations set out by the Financial Action Task Force, Know Your Customer (KYC) procedures are a way for businesses and financial institutions to authenticate the identity and potential risks of current or prospective clients. The ultimate aim is to ensure compliance with governing laws and, in particular, refrain from conducting business with trade sanctioned individuals, or acting as the vehicle for money flow originating from anyone involved in money laundering or financial terrorism.

As a luxury industry at risk of being targeted by financial criminals, as well as recently sanctioned individuals, the superyacht industry needs to take its KYC obligations seriously. The consequences of not doing so could be significant. With the rules having become increasingly stringent and far-reaching over the last 10 years, most brokers and clients are now well versed with carrying out KYC procedures in any transaction.

Camper & Nicholsons was one of the first brokerage houses to hire an in-house legal expert and develop its compliance department in anticipation of this new era of transparency, with an increasing number of competitors following suit. For Camper & Nicholsons clients, this means the company has a wealth of experience ensuring its KYC procedures remain simple and consistent.

“We liaise with the client, or their family office or lawyer, to collate information regarding the client’s identity, place of residence and source of wealth, as well as the owning company structure,” explains Vanessa David, governance, legal and compliance director at Camper & Nicholsons. “We then use this information to carry out due diligence and make a risk assessment that informs our decision – and those of the clients we represent in sales and charter operations – to go ahead with the deal or not.”

Legislation can differ from country to country, but the goal for Camper & Nicholsons is always the same: to identify the client and source of their funds, whether it's related to a yacht sale, charter, or management. “We do not blacklist anyone or ban a category of client, but we do have to comply with the law,” adds Vanessa. “We work with every client that we are allowed to work with and those who cooperate with the need for transparency.”

Collecting this dossier of information will also ensure the transaction goes through smoothly as it progresses to its later stages. “It’s not only brokerage sector that needs those KYC documents; any party involved in the deal will need the same information, including the bank handling the funds and insurers,” Vanessa advises. A transaction may be stopped by the bank if the KYC process has not been properly fulfilled, so having this aspect cleared as soon as possible ahead of the transaction will save time.

While most reputable clients are accepting of KYC procedures, and the process is fluid most of the time, there can sometimes be hurdles. “Some brokers can be reluctant to share client information with their competitors in fear of the client being ‘stolen’,” cautions Vanessa. “But it’s important they understand that we are not trying to steal the client; we simply want to ensure the deal goes through in compliance with the law.”

Clients can also be rest assured that Camper & Nicholsons commitment to privacy and data protection is unwavering. Compliance with GDPR regulations is embedded throughout the company’s procedures and all client information is held in a protected system. The aim is not to constantly ask clients for information but to create a streamlined process that provides an efficient service.

While KYC procedures are not a new phenomenon, they’ve garnered renewed attention in the superyacht industry due to recent world events and high-profile sanctions. In fact, KYC procedures have been a longstanding cornerstone of responsible and legal superyacht transactions. As Vanessa concludes, “If everything goes well, the information we collect will never be used. If something doesn't go well, however, the KYC documents are there to protect the brokers and show they did due diligence. We cannot live without KYC in today’s age, and I believe everybody will soon learn not to see it as an obstacle, but as part of the global process to ensure the transaction goes well and the interests of all parties are safeguarded.”