25 January 2022
Crowdlending, crowd equity, donations, and kitty… Any alternative financing platform is the place for financial transactions between lenders (or donors) and project holders. Each stakeholder must have confidence in the platform: it is essential to create an environment that guarantees the security of transactions and facilitates the connection. But how do you go about achieving this? Here are the answers.
Crowdfunding is a term used to describe the financing of projects by the crowd (crowdfunding is a combination of the words “crowd” and “funding”). Thus, anyone can be a lender or a donor to a project. In this context, it seems necessary to know precisely who the actors involved are and where the funding money comes from. In this sense, the authorities have implemented regulatory requirements to secure transactions.
The fight against money laundering and terrorist financing or AML/CFT concerns the entire financial sector. The 4the and 5the AML/CFT directives require each company involved in financial transactions to put in place effective control systems. As financial actors, alternative financing platforms are not exempt from these directives. They must therefore put in place a system to combat the financing of terrorism, money laundering, and fraud.
Insofar as they carry out collection operations on behalf of third parties, platforms are similar to financial organisations. As such, they must take steps to identify individuals and transactions. The implementation of a KYC or Know Your Customer procedure aims to meet the obligation of vigilance imposed by the regulations. This compulsory procedure consists of collecting and verifying information on the identity and integrity of investors and project holders.
To benefit from support and key functionalities for the verification of information and the fight against money laundering and terrorist financing, alternative finance platforms can call on a PSP, or payment service provider. In addition to managing and securing transactions, the PSP assists platforms in complying with legal obligations. In particular, it provides useful tools to easily carry out the procedures for securing transactions.
Some PSPs such as Lemonway offer features that read digital documents and extract information from them to verify the person’s identity. Once the documents are validated, the transaction is approved within seconds. Instant KYC makes it easy and secure to transact and connect with the various players on the platform.
Please note: Lemonway’s instant KYC only concerns the verification of accounts of natural persons. Legal entity accounts are still subject to “classic” KYC procedures, taking between 2 hours and 48 hours depending on the option chosen.
To secure transactions, rely on powerful payment account management technologies: they facilitate payment reconciliation with CDPs.
To ensure that the business is fully compliant with PSD2, some schemes provide for the automatic ring-fencing of investor funds. In this way, the collection of funds on behalf of third parties is secured.
Then, make sure that the payment orders are made directly to the bank accounts of your project leaders, in a perfectly secure manner.
Finally, and for perfect security of transactions, automate the repayment of capital and the payment of interest to your investors, as well as the disbursement of funds to your project holders, on the bank account of their choice.
As an ACPR-approved payment institution, Lemonway can help you automate and secure your crowdfunding platform’s transactions. Our team of experts will guide you throughout the project, to provide you with the most suitable solution for your business. Contact us to learn more about how Lemonway works!
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