Why Suppliers Request KYC Information — And Why It Matters for Your Business

At times, these requests can feel intrusive:

• Why are they asking for passports and proof of address?

• Why do they need details about the company’s ownership structure?

• We’ve worked together for years, surely they know who we are?

  
  

This reaction is understandable, but there are strong regulatory reasons behind these checks. By understanding what KYC is and why suppliers need it, SMEs can navigate the process more smoothly and avoid unnecessary delays or misunderstandings.

📌 What Does KYC Mean?

KYC stands for “Know Your Customer”. It refers to the process businesses must follow to verify the identity of their clients, suppliers and partners before entering into a business relationship or conducting transactions.

KYC is a key part of Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations. Its core aims are to:

• Confirm that a business or individual is who they claim to be

• Understand the ownership and control structure of companies

• Assess potential financial crime or reputational risks

• Ensure ongoing monitoring to detect unusual or suspicious activity

  
  

In short, KYC is about knowing exactly who you are dealing with and being able to prove it if regulators ask.

🧭 KYC Requests Are Driven by Legal Obligations

Businesses in both the UK and Gibraltar must comply with strict AML and CTF legislation.

Under frameworks such as the UK Money Laundering Regulations 2017 and Gibraltar’s AML regime, companies in regulated sectors (including finance, property, legal services and gaming) are required to verify the identity of their customers, suppliers and partners.

This is not optional. Regulators such as HMRC, the Financial Conduct Authority (FCA) and the Gibraltar Financial Services Commission (GFSC) expect businesses to be able to demonstrate that they have carried out thorough due diligence. Failure to do so can lead to fines, regulatory action, reputational damage and, in some cases, criminal liability.

👤 Why Businesses Must Verify Other Businesses

KYC procedures are not limited to individuals. Businesses must also verify other corporate entities to confirm their legitimacy and identify their Ultimate Beneficial Owners (UBOs), the individuals who ultimately own or control the company.

This is why suppliers may request documentation such as:

• Company registration certificates

• Identification documents for directors and shareholders (e.g. passports or driving licences)

• Proof of business and personal addresses

• Ownership structure charts or parent company information

  
  

These checks are designed to ensure that suppliers are not unknowingly doing business with shell companies, sanctioned individuals or entities involved in money laundering.

🌍 Gibraltar’s Regulatory Landscape

Gibraltar is a well-regulated jurisdiction with a strong focus on financial services and online gaming. Because of its international profile, businesses based there are often required to apply enhanced due diligence, particularly for cross-border relationships.

This means that if you are a UK business working with Gibraltar-based suppliers (or vice versa), you may find the level of scrutiny to be more detailed than expected. This reflects regulatory expectations rather than a lack of trust.

🔄 Why You May Be Asked for Information More Than Once

It’s common for SMEs to wonder why they are repeatedly asked for KYC information they have already provided.

AML regulations require businesses to:

• Keep KYC information accurate and up to date

• Review records periodically, often annually

• Refresh checks if there are changes to ownership, business address or the nature of the relationship

  
  

This means suppliers may need to re-verify details even for long-standing clients. These repeat requests are part of their regulatory obligations, not unnecessary bureaucracy.

🧾 The Role of Proper Accounting Records in KYC Compliance

KYC is closely linked to good financial record-keeping.

Regulators expect businesses to maintain accurate and up-to-date accounting records that support their due diligence efforts and make their transactions transparent and traceable.

This includes:

• Keeping clear records of invoices, receipts and payments

• Maintaining up-to-date ledgers and bank reconciliations

• Documenting the purpose and beneficiaries of transactions

• Retaining due diligence documents and financial records for the required legal period (usually five to seven years)

  
  

Strong accounting practices make it easier to demonstrate compliance during inspections or audits. They also help identify anomalies early, for example, payments from unexpected sources or irregular transaction patterns, which could indicate a KYC or AML red flag.

For SMEs, integrating proper accounting systems with KYC procedures is a practical way to reduce risk and ensure smoother regulatory checks.

🧠 KYC Protects Both Parties

While KYC checks can feel time-consuming, they offer real benefits for both sides:

• They demonstrate transparency and build trust between businesses

• They reduce the risk of inadvertently becoming involved in financial crime

• They often speed up future onboarding and transactions once your information is securely held on file

  
  

Conversely, failing to provide KYC information can delay contracts, disrupt supply chains, or even lead to business relationships being paused or terminated.

🧩 How 4GL Concepts Can Support Your Business

At 4GL Concepts, we know that for many SMEs, staying on top of KYC-related requirements and maintaining accurate financial records can be a real challenge, especially when your priority is running and growing your business. We specialise in setting up clear, reliable accounting systems that make record-keeping and financial transparency easier to manage.

We support organisations in the UK and Gibraltar by:

• Implementing efficient accounting systems that simplify day-to-day financial record-keeping

• Helping ensure your financial data is well organised and easy to retrieve for audits, inspections, or supplier requests

• Laying the groundwork for accurate, traceable records that support KYC and AML obligations

• Reducing administrative headaches by streamlining how your business captures and stores financial information

  
  

By putting the right accounting systems in place, we help SMEs create a strong foundation that supports regulatory processes, giving you greater clarity, better organisation, and more time to focus on your core business.

🏁 Conclusion

When suppliers request KYC information, they are not being intrusive, they are fulfilling their legal obligations. KYC and proper accounting records go hand in hand: together, they provide the transparency and traceability regulators expect.

By understanding these requirements and partnering with specialists like 4GL Concepts to strengthen your accounting systems, SMEs can reduce the administrative burden, stay organised, and maintain trusted business relationships.

✅ Key Takeaway:

KYC goes far beyond simple paperwork, it is a legal requirement that plays a crucial role in protecting both businesses and the wider financial system. By having the right accounting systems in place, SMEs can stay organised, respond to requests efficiently, and remain fully prepared.

When SMEs cooperate with KYC processes and keep their records in good order, they build stronger relationships with suppliers, minimise delays, and demonstrate a proactive approach to compliance.