Know Your Investor (KYI)

🔹 Definition

Know Your Investor (KYI) is the process of verifying the identity, background, and risk profile of investors before allowing them to participate in investment opportunities such as private placements, venture capital, crowdfunding, real estate funds, or tokenized securities. KYI is a key part of regulatory compliance in jurisdictions where securities laws, AML/CFT regulations, and investor protection rules apply.

The goal of KYI is to ensure that the investor is both legitimate and eligible, and that the source of investment funds is legal and traceable.

🔹 Frequently Asked Questions (FAQs)

Q1: What does KYI verification typically include?

• Identity verification: Passport or national ID
• Accreditation status: Confirming if the investor qualifies as an accredited, sophisticated, or institutional investor
• Proof of funds: Verifying source of wealth and source of funds
• Sanctions and PEP screening: Checking against global watchlists
• Jurisdiction checks: Ensuring compliance with local securities regulations (e.g., SEC, MAS, ESMA)

Q2: Why is KYI important?

• Prevents money laundering and terrorist financing through investment channels
• Ensures only eligible and qualified investors participate in restricted offerings
• Protects issuers from regulatory violations and reputational risk
• Supports investor suitability assessments and disclosure obligations
• Complies with cross-border investment regulations and tax reporting requirements

Q3: Where is KYI commonly applied?

• Private equity and venture capital funds
• Real estate investment trusts (REITs) and tokenized asset platforms
• Crowdfunding platforms
• Crypto and Web3 projects offering token sales or ICOs
• Securities brokers and financial advisors

Q4: What’s the difference between KYI and KYC/KYB?

• KYC: Know Your Customer – focuses on retail clients
• KYB: Know Your Business – focuses on legal entities
• KYI: Know Your Investor – focuses on individuals or firms seeking to invest, ensuring eligibility and legitimacy
  Each serves a different compliance function but all are part of a unified risk-based due diligence strategy.

Q5: How can KYI be automated?

• Use investor onboarding platforms with embedded eKYC and accreditation checks
• Integrate source of wealth verification APIs
• Apply jurisdictional filters to block restricted investors
• Store and update investor profiles in a secure compliance vault
• Trigger enhanced due diligence (EDD) for high-risk investors or jurisdictions