KYC/KYB and Beneficial Ownership Reporting

KYC/KYB Requirements for DAO LLCs

• KYC refers to identity verification and background checks conducted on individuals. KYB refers to when the verification is done on companies.

• KYC/KYB reporting, verification, and background checks are done at the time of registration and each year during annual filings.

• The following are the requirements for who must complete KYC/KYB:

  • Category A: Any person or company that owns 25% or more of the governance rights of a DAO LLC. These are considered beneficial owners of the DAO LLC for compliance purposes.

  • Category B: If no one is in Category A, then all managers (if any, since it is optional to have managers). These are considered beneficial owners of the DAO LLC for compliance purposes.

  • Category C: If no one is in Category A or B, then any member of the DAO LLC. This member is not considered a beneficial owner but must still be listed on the Beneficial Owner Information Report form and conduct KYC/KYB.

• If a company is the legal person fitting into Categories A, B, or C, then its ultimate beneficial owners (natural persons) must also perform KYC as part of the KYB process.

Beneficial Owner Information Report (BOIR)

• The BOIR form is submitted as part of a DAO LLC's registration and annual filing process.

• The BOIR requires similar reporting to the above KYC/KYB requirement, except that:

  • For Categories A or B (see above), the ultimate beneficial owners of any entities must be listed rather than the entities themselves, i.e. the natural persons (not companies) that have ultimate control over the entities falling into the categories.

  • Whether or not natural persons are considered "owners" of those entities, they may be considered beneficial owners for compliance purposes. For example, a non-profit entity may not have "owners" but still has beneficial owners for compliance purposes. Similarly, if managers, officers, directors, or trustees are ultimately in control of those entities, they are considered beneficial owners for compliance purposes, even if they are not owners of those entities.

KYC/KYB Process

• KYC/KYB is completed by our third-party KYC provider, Synaps. Synaps is based in Europe and is subject to the GDPR (General Data Protection Regulation) to protect your data.
• To complete KYC, each individual must prove liveness and have a valid passport and proof of residency (utility bill, internet bill, or bank statement).

• To complete KYB, a company must provide various documents proving its legitimacy, good standing, beneficial ownership, etc.

Blacklisted Countries and Individuals

• The Marshall Islands follows United States (e.g. OFAC) and United Nations sanctions requirements when determining whether to accept an individual or company performing KYC.

• This, for example, prohibits registrations by residents (but not always unsanctioned citizens) of countries and regions of Iran, Syria, Cuba, North Korea, Russia, and the Crimea, Donetsk, and Luhansk regions of Ukraine.

  • More information on the OFAC list can be found here.
• The KYC/KYB process also reviews international criminal, politically exposed person, and adverse media databases.

Sharing of KYC Information

• MIDAO and the Marshall Islands Government will only share information provided through KYC, KYB, and Beneficial Owner Reporting as part of valid law enforcement requests, as determined by the Attorney General or Courts of the Marshall Islands.