generated from coulomb/repo-seed
tegwick
0741a2e3a5
Add source notes on FinCEN CDD/BOI beneficial ownership and ISO 6523/ALEI registry identifier subtypes. Resolve OpenQuestions: Beneficial Ownership Relationship as dedicated type; Registry Identifier and Proxy Commercial Identifier as Reference layer specializations. Update glossary, conceptual model, terminology, downstream recommendations, and corpus index.
105 lines
4.9 KiB
Markdown
105 lines
4.9 KiB
Markdown
# KYC AML and Commercial Identity Binding
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## Source Type
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Regulatory framework synthesis. USA PATRIOT Act CIP, FinCEN KYC/AML, FATF digital
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identity guidance.
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## Domain
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Financial regulation, customer identification, beneficial ownership, and ongoing
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commercial relationship monitoring.
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## Why This Source Matters
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KYC/AML is where governments **mandate** commercial identity binding: institutions
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must verify who they transact with, retain evidence, and monitor behavior. This is
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the strongest practical force turning fluid identities into **regulated,
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high-stakes counterparty records**.
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## Key Concepts
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- **KYC (Know Your Customer)**: policies ensuring institutions know customers and risks.
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- **AML (Anti-Money Laundering)**: broader program preventing illicit finance.
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- **CIP (Customer Identification Program)**: US mandate to verify identity before account opening.
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- **CDD (Customer Due Diligence)**: risk assessment of customer relationship.
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- **EDD (Enhanced Due Diligence)**: heightened review for high-risk customers.
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- **Beneficial owner (BO)**: natural persons owning/controlling legal entity customers
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(historically 25% threshold; may be lowered for high risk).
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- **Ongoing monitoring**: transaction surveillance after onboarding.
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- **Record retention**: CIP records kept years after relationship ends.
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- **Sanctions / PEP screening**: compare identities against government lists.
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- **Digital identity (FATF)**: guidance on digital ID assurance for KYC.
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## Relevant Terminology
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| Term | Source meaning |
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| --- | --- |
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| KYC | Know-your-customer compliance program. |
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| CIP | Customer identification at onboarding. |
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| Beneficial owner | Natural person behind legal entity customer. |
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| PEP | Politically exposed person (elevated risk). |
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| Due diligence | Risk-based identity and activity review. |
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| Ongoing monitoring | Continued scrutiny of customer activity. |
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| Risk profile | Customer risk classification. |
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| FinCEN | US Financial Crimes Enforcement Network. |
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## Modeling Assumptions
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- **Commercial relationship triggers identity rigor** proportional to risk.
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- **Legal entity customers require beneficial owner identification** — natural
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persons bound to organization customers.
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- **Identity verification is not one-time**; monitoring continues across lifecycle.
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- **Evidence must be retained** even after account closure.
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- **False identity has regulatory and criminal consequences** — binding is external,
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not user preference.
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- **Friction is accepted** where commercial stakes require it.
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## Identity-Canon Implications
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- KYC onboarding creates **Commercial Record** + **Commercial Commitment** (regulated
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relationship) bound to **Natural Person** and/or **Organization/Legal Entity**.
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- **Beneficial owner** maps to **Natural Person** linked via **Beneficial
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Ownership Relationship** to Organization/Legal Entity customer (see
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`beneficial-ownership-kyc-boi.md`).
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- CIP evidence maps to **Evidence Source** with **Assurance Level**.
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- Ongoing monitoring produces **Evidence Source** events affecting **Lifecycle State**
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and **Trust Relationship**.
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- Supports fluid-to-bound transition: anonymous lead → verified customer with retained proof.
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- **Account** (bank/login) is insufficient alone; KYC binds the **counterparty**.
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## Terminology Conflicts
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- **Customer (KYC)** vs. **Customer (Stripe)** vs. **Customer (role)**: regulated
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counterparty vs. billing object vs. commercial role.
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- **CIP customer** vs. **Account holder**: verified party vs. access credential.
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- **Digital identity** vs. **login identity**: assurance-ranked ID vs. session user.
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## Candidate Canonical Mappings
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| KYC/AML concept | Candidate canonical concept |
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| --- | --- |
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| Verified customer | Commercial Record + Actor binding |
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| CIP evidence | Evidence Source |
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| Beneficial owner | Natural Person + Beneficial Ownership Relationship |
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| Risk profile | Assurance Level + metadata on Commercial Relationship |
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| EDD review | Evidence Source (enhanced) |
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| Sanctions hit | Lifecycle State / Trust Relationship revocation |
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| Transaction alert | Evidence Source event |
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| Record retention | Lifecycle/archival policy on Commercial Record |
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## Open Questions
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- Standard `control_basis` enum across US CDD and EU AMLD wording.
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- How to model BOI registry volatility in lifecycle without canon becoming legal advice?
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## Resolved (see beneficial-ownership-kyc-boi.md)
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- Beneficial Owner → **Beneficial Ownership Relationship** (dedicated type, not Ownership subtype).
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## References
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- Thomson Reuters, Customer Identification Program overview — https://legal.thomsonreuters.com/blog/overview-customer-identification-program-cip/
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- Okta KYC definition — https://www.okta.com/identity-101/kyc/
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- FinCEN, USA PATRIOT Act Section 326 — https://www.fincen.gov/resources/statutes-regulations/usa-patriot-act
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- FATF Guidance on Digital Identity — https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Guidance-on-Digital-Identity.html |