There’s a nasty weed disrupting the world of finance: KYC. It’s pervasive, affecting more people every day, yet most people have never heard of it. The letters stand for 'Know Your Client' and, like many obstacles in our modern lives, it was born with the best intentions. It’s an international problem intended to stop villains by ensuring that institutions know who their clients really are, but it is now running wild in all developed nations. It seems to me that KYC does nothing much to stop the bad guys, and it causes a huge expense and loss of productivity for the rest of us.



This month, we sold the last of our residential investment properties, having learned the hard way that residential real estate requires a lot more effort than shares for a much lower return. Of course, I asked our family solicitors to do the conveyancing. As part of the KYC rules, they told me they would have to identify us. When I asked why they would need to 'identify' two people they know well, who have been clients for 30 years, the response was, 'It’s a legal requirement'. So we had to produce passports and driver's licences and jump through all the other hoops associated with getting ID signed off.

Then, I talked to the bank about where it is best to deposit the sales proceeds and mentioned the possibility of opening an account to keep the money separate from our other funds. I wanted to put some into a 12-month term deposit, ready to pay the capital gains tax (CGT). We all know that easily accessible money tends to get spent, and the last thing I want is to get a bill for CGT with no money ready to pay for it. Guess what? The bank, of which we are also long-term customers, said that when opening a new account, they had to formally identify us under the KYC rules.

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