Client information checks: core concepts
Below are three key concepts that the client verification process is rooted in.
KYC, or know your customer
KYC forms the identification layer of the client verification framework. Before a broker can serve a client—and also at different stages of the client-broker relationship—it must verify the client's identity with reliable documents. The reliability criteria for the information provided by the client are set either by the company or by the regulating authority. In practice, the client may be asked to provide their passport or national ID, proof of address, and answer questions about employment, trading experience, and expected trading activity.
AML, or anti-money laundering
AML is the framework of laws, regulations and internal controls used to identify and verify clients, assess financial crime risk, and prevent the financial system from being used to launder criminal proceeds or finance illicit activity.
Regulated brokers are required to monitor activity, assess risk, and report suspicious patterns to their relevant authority. For example, Elev8 routinely performs AML checks in accordance with the procedures set by the regulators in the jurisdictions where the broker is licensed.
Source of wealth (SoW) and source of funds (SoF) checks
These two checks are a core element of the AML framework. The SoW check aims to reveal how a client accumulated their assets, while the SoF check explains the origin of the specific money being deposited. For example, a client might have built their wealth over many years of their career, while the funds for a particular deposit came from selling a property.
Sometimes, a broker may start an SoW or SoF check when a deposit or withdrawal significantly exceeds the client's previous transaction amounts. Such a discrepancy can raise a legitimate concern for the broker, resulting in a client information check. It is worth noting that in such cases, a broker's request for information is nothing more than a common protective measure triggered by a discrepancy in client transactions. Once the client provides the requested information and the broker verifies it and finds it satisfactory, the transaction will be processed as usual.
The reasons behind verifications
Traders may find brokers' requests for personal information alarming, or even see them as an invasion of privacy. However, for regulated brokers, these requests are a part of regular compliance work that ensures they meet regulators' requirements.
Regulated brokers operate under licence conditions issued by supervisory authorities, and those conditions carry legal force. The requirements traders face derive from national legislation and international regulatory standards, recommendations, and directives. In particular, the anti-money laundering framework, upheld by the Financial Action Task Force (FATF), extends to over 200 jurisdictions worldwide and provides measures to tackle illicit financial flows.
It is important to keep in mind that checks are not uniform. For example, enhanced due diligence is more likely where the deposit is large relative to the profile the client originally provided, or where payment methods or patterns differ from the account history. At the same time, a new client may be asked to verify their information, too, and this should come as no surprise when engaging with a regulated broker. Regardless of the client's trading experience, the verification procedure, including a heightened level of checks, doesn't indicate anything is wrong. It indicates that the broker's monitoring systems are designed to detect changes or transactions that may appear out of the ordinary.
Such checks have a distinct value for clients. For example, a timely information check by a broker can help mitigate the negative consequences of a criminal account seizure.
Documents that typically satisfy a SoW check
While the evidence required varies case by case, the most commonly accepted documents include:
- bank statements showing the accumulation of funds and the transfer to the broker
- proof of salary or other employment income, including payslips, an employment contract, or a letter from an employer.
- documents confirming investment income, including brokerage or custody statements, dividend confirmations, and contract notes from the sale of securities
- other documents evidencing a specific source, including a property sale contract, business sale agreement, company accounts or dividend vouchers for owner-managers, inheritance or probate documents, a deed of gift, tax returns, or a pension statement.
This list is illustrative. The documents a broker requests depend entirely on the circumstances of the individual review, the client's stated profile, and the applicable regulatory requirements.
Legitimate requests
When a broker asks for additional documentation, it is gathering information to complete a file, not asserting that a client has done anything wrong. Compliance teams are obliged to build a coherent picture of every client, and any gap in that picture raises a question, regardless of who the client is.
Automated monitoring systems flag transactions against generic parameters—size, frequency, geography, and deviation from expected behaviour—and a flag is a prompt for a human to look more closely. The majority of such reviews conclude with the file updated and the account operating normally.
It is worth noting that such requests don't reflect a judgment about the client's honesty. Regulated brokers ascertain their clients' information on a regular basis. For them, making information requests only when a broker suspects wrongdoing would run counter to proactiveness as a core principle of any data verification framework.
General good practice for clients
Responding promptly and completely is usually the fastest route to closing a review. We at the Elev8 broker recommend adhering to the following steps when facing a request for information from the Elev8 team:
- carefully review the list of requested information
- provide up-to-date and accurate documents
- ensure that the information and required document details are legible
- contact Elev8 support for clarification if you do not understand the requirements (communicate only through direct messages on official channels, since public exposure of personal information can create additional risks).
Robust AML, KYC, and source-of-funds procedures can create value—both for brokers and clients. Brokers maintain them to fulfil their obligations before regulators. On top of that, the same controls that satisfy regulators can also help to protect clients from account takeover, fraudulent deposits, and the seizure of funds.
At Elev8 broker, our regulated status is both a responsibility and a privilege—and our compliance processes, including client verification, ensure we maintain it. While verification checks require additional actions from the client, they allow us to fulfil our obligations to regulators as a licensed broker. This way, the Elev8 broker can provide services responsibly while mitigating risks to which traders might otherwise be exposed.
Disclaimer: This article does not contain or constitute investment advice or recommendations and does not consider your investment objectives, financial situation, or needs. Any actions taken based on this content are at your sole discretion and risk—Elev8 accepts no liability for any resulting losses or consequences.
