Banks and payment processors are required by law to know who their customers are and to keep an eye on what they do. A founder abroad gets more questions than a US founder, not because anyone is suspicious, but because the checks are harder to complete from a distance. If you're prepared, they're a formality. Here's what you'll be asked, when, and how to have the answers ready.
When you open the account
KYC checks the people and KYB checks the company. The provider identifies the person opening the account and every owner of 25% or more, with a passport and proof of address, and verifies the company with its formation document and EIN. It asks what the business does, where its customers and suppliers are, roughly how much money will move and from where, and whether any owner holds or held a prominent public role. Then it compares the answers with each other and with your website. Consistency is most of the test.
After it opens
Monitoring doesn't stop, and certain things prompt a question:
- Volume well above what you said to expect.
- Money from a new country, a new kind of customer or supplier, or a high-risk source.
- A large transfer to a personal account with no clear link to the business.
- Payments that look as if they're on someone else's behalf.
- A product or category the provider restricts, discovered after the account opened.
The question usually comes as a request for documents: an invoice, a contract, a statement or an explanation. Answer within a few days, completely, with the documents attached. A question you answer is closed. A question you ignore can become a limit on the account, and an ignored limit can become a closure.
Chargebacks
A chargeback is a customer's card issuer reversing a payment at the customer's request. The processor takes the money back from your account, charges a fee, and gives you a window to send evidence: the order, proof of delivery, messages with the customer and your refund policy. Whether you win or lose, the chargeback counts against you. Visa and Mastercard track the share of a merchant's transactions that turn into disputes, and a merchant that stays above their thresholds, which sit at roughly 1% to 1.5%, is put into a monitoring programme with fines and, eventually, can lose the ability to take cards. Processors usually step in earlier.
Keeping chargebacks down
- Use a clear billing descriptor, so customers recognise the charge on their statement.
- Give honest delivery times, track shipments, and make your refund policy easier to use than a chargeback.
- Reply to support requests within a day, because many chargebacks come from customers who couldn't reach you.
- Refund quickly when you know you'll lose, before the customer goes to their bank.
- Avoid categories prone to disputes unless you can afford the reserve a processor will hold.
The records that answer every question
Keep one folder with the formation document, the EIN letter, the operating agreement, passports, proofs of address, your website and a one-paragraph description of the business. Add invoices for what the company is paid for, receipts for what it pays, and reconciled statements. With those, you can answer almost any request from a bank or processor within the hour, and accounts that answer quickly tend to stay open.