Technology has proved to be advantageous in many domains but at the same time, it has opened doors to frauds and scams. Nowadays, it is critical to the operational effectiveness of the financial institutions that they should keep an eye on the people they do  Techyleak business with. Investment activity is the need of every sector to grow and prosper but it also does not mean allowing each and every investor to enter the market or to be taken on board by a business entity or a financial institution. Because it is possible that the apparent investor may not be actually what he claims to be. Thus, it is due responsibility of the relevant authorities to run certain background checks so that credibility could be ascertained to the maximum possible level

Manipulative Investment Frauds

Investment frauds have started to take different forms. Astonishingly these frauds are not easy to identify. The criminal lobby takes the business entity into confidence through fake schemes and offerings. Also, many companies that look like legitimate platforms actually come out as fake when investigated. These companies develop a proper setup to deceive investors by pretending to be original government-authorized companies. In fact, they show fake documents to ensure their legitimacy. 

Moreover, there are companies that are original but they also commit fraud with investors by overstating their financial statements, showing them to be feasible in the eyes of the investor so that he considers the company for investment.  

Investment Checks for an Individual entity

• Nature of Investment

Investment checks do vary with respect to the nature of the investment. For instance, if there is a financial institution taking an individual onboard for the said investment. The documentation required in this process will vary accordingly. These are as follows:

• Authenticating the Name and Address

The bank will need the name of the individual to verify if he owns an authentic identity. If a discrepancy occurs, it is first of all ethically asked for that individual to justify. And he fails to do so, the verification process fails. If it proceeds positively then other steps are followed as per protocol.

Next, the individual is checked for information like date of birth, place of residence, and nationality. The place of residence is duly confirmed to authenticate the truthfulness of the individual. It is asked by the financial institutions usually to confirm if the person is not a tenant and owns the residence. 

This is because if the person lives as a tenant then it would raise questions about his strong financial position. It is obvious that a financial institution will be reluctant to take investment from a person who himself lives in someone else’s house. It definitely shows that the person is financially weak. 

• Documents Not Valid for Verification

In the investor verification process, it is important to note that the bank does not accept an e-statement, mailing addresses, or P.O. box as a proof of verification because this type of information can be easily forged or can be stolen with minor effort. 

• Verification of Income Source

In addition to the above-mentioned requirements, the bank also asks for valid justification for the sources of funds and income that a person owns.  

Investment Checks for a Business Entity

The verification process in the context of taking investments differs for a business entity as it is more subjected to suspicion to get involved in false activities to gain investment The bank or any other financial institution may ask for the following documents from a business entity to verify its credibility to acquire investment.

• Verifying Validity of Memorandum and Articles of Association

MOA and AOA ascertain the fact that the business is commenced with proper documentation and registration which strengthens its legal identity. 

• Verifying Validity of Certificate of Incorporation

The bank also checks the certificate of incorporation from a private business concern. Whereas, the validity of a public limited company is verified with the certificate of commencement in addition to the certificate of incorporation.

• Authenticating the Board of Directors

Verification for investment purposes in case of business concerns also requires the submission of the list of board of directors. The bank also authenticates the real candidate demanding investment to confirm the fact that the company needs investment for itself and that it is not acquiring money from the bank for any third party.

Final Thoughts

Granting permission to an entity to take money from the bank for investment purposes involves various critical risks. So, it is not only the duty of the bank to do relevant needed document verification to ensure investors’ credibility. But also, it is the right of the bank to ascertain the validity of an entity’s money to be free from laundering activities. It is advisable that all the concerned parties should show cooperation so that it could minimize the danger of risk and make the transactions safe for clients as well.