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 (opens in new tab) 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, SumSub (opens in new tab). SumSub 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.

Sanctions, Restricted Jurisdictions, and Higher-Risk Cases#

• The Marshall Islands implements United Nations targeted financial sanctions, and MIDAO's screening also covers United States (e.g. OFAC) sanctions lists 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 (opens in new tab).
• The KYC/KYB process also applies risk-based screening, including reviews of international criminal, politically exposed person (PEP), and adverse media databases.
• Passing KYC/KYB is not automatic. MIDAO may request additional information, pause onboarding, decline a registration, or decline an annual filing where required by law or by MIDAO's risk controls.

Sharing of KYC Information#

• KYC/KYB and BOIR information is not public and is never published.
• MIDAO may share information as required or permitted by applicable law, including in response to valid requests from courts, law enforcement, regulators, supervisors, or other competent authorities.

Accuracy Matters#

• Clients must provide complete and accurate information. Incorrect, incomplete, outdated, or misleading information may delay registration, prevent annual filing completion, affect certificates of good standing, or lead to refusal, suspension, cancellation, or reporting where required.

Common KYC Issues and Resolutions#

A few categories of stuck KYC submissions come up repeatedly. None of these are dealbreakers — please contact our team and we can usually resolve them quickly.

• Bank statement shows only a middle initial, not the full middle name. When a passport or other ID lists a full middle name and the proof-of-address document (often a bank statement) shows only an initial, SumSub may flag a mismatch. Let us know — our compliance team can review the submission and either approve based on a documented explanation or suggest an alternative proof-of-address document (utility bill, internet bill).
• Cyrillic / Latin script matching. Names that exist in two scripts (Cyrillic and Latin transliteration) sometimes fail automated matching. Please reach out and our team will review the documentation and confirm acceptable evidence on a case-by-case basis.
• "You already have a profile" error. If you have completed KYC with MIDAO recently for another DAO LLC or another role, you may not need to repeat the process. Please contact our team and we can confirm whether your existing profile can be reused.
• Address documentation rejected. Sometimes the issue is OCR processing rather than the document itself. Send us the file and our compliance team will review it directly and let you know what is needed.
• Where to get help. For any KYC issue, please contact MIDAO and we will investigate. Our team works directly with our KYC provider on edge cases.