Making Money Online? Expect a “KYC” Audit.
When you transition your Farm business online and begin to make “real” money paid digitally, then you can expect merchant processors will require a “KYC” audit.
“KYC” stands for Know Your Customer and is intended to provide further validation that you or your business is, in fact, authentic and lawfully transacting and conducting business. The intent of a KYC audit is to reduce fraud by unscrupulous individuals and thereby reduce the risk of loss.
Some merchant processors will conduct a KYC audit prior to underwriting transactions on their payment rails. However, on most ecommerce platforms today, many merchant processors will take on “some risk” by permitting anyone to set up a merchant account instantly to start conducting business online (versus putting up barriers to get started).
When is a KYC Audit Triggered?
A KYC audit may be triggered by a combination of your transaction history, organizational details, and tenure. Algorithms that trigger KYC audit requests are based on a wide variety of factors, including gross volume, the number of individual transactions, the average order value, the number of card authorizations, the number of international payments - and more. The details of your business formation and tenure both play a significant factor.
Should I be concerned about a KYC Audit?
No. A KYC audit is the normal course of action in business for merchant processors to reduce risk, fraud, and losses. In fact, US government regulations require the collection of certain information by law when banking transactions and/or monetary transfers exceed certain thresholds.
Do other ecommerce platforms require a KYC Audit too?
Yes. US government regulations compel ALL merchant processors to collect and authenticate specific information from any person or organization when certain monetary thresholds are met to combat fraud, illicit activities, and money laundering.
What happens when a KYC audit is requested?
You may receive notice directly from our merchant processor (Stripe) and/or the Barn2Door Support team for specific information required to validate your merchant account. This may include business details, ownership interests, EIN/SSN, dates of birth, etc. A complete listing of potential information data requests are set forth by Stripe here, including a list of acceptable documents for evidentiary purposes here.
Consider a KYC audit as a “bonafide credit check” of your business. Funds in your merchant account may NOT transfer to your deposit account until your KYC audit is completed.
What happens if I FAIL to comply with KYC audit requests?
Monies in your merchant account will NOT be transferred or deposited to your bank account if you fail to comply with the request. Again, this is a restriction set forth by US banking regulations. Legally, merchant processors are compelled to withhold fund transfers until a KYC audit is completed, lest they be considered complicit in fraud, illicit activities, or money laundering schemes.
Are there similar KYC requirements in other countries?
Yes, depending on the country where you do business, regulatory requirements may impose more or less restrictive underwriting and authentication requirements for merchant accounts.
Can I continue to conduct business during a KYC Audit?
Yes. Your Farm can continue to operate your business as-is (lawfully). However, monies will likely be on HOLD in your merchant account until your KYC Audit is complete.
How long does a KYC Audit take?
Assuming all the information you’ve provided in response to a data request is true, correct, and properly documented, then you can expect merchant processors to complete a KYC audit in about 5 business days. If there are no additional data requests, then monies in your merchant account should post to your bank account in 2-5 days thereafter.
More Questions?
If you have further questions about KYC requests, we encourage you to visit resources posted by Barn2Door’s merchant processor (Stripe), published here: Know Your Customer Obligations.