AngelList requires all investors to complete the Know Your Customer (KYC) process – including control person information and, in specific instances, beneficial owner information – as part of onboarding to comply with U.S. financial regulations. This process supports the treasury infrastructure that powers all funds on the AngelList platform, referred to as Networked Banking.
The Role of KYC in Networked Banking:
AngelList’s Networked Banking system is the foundation of how funds operate on the platform, enabling secure and efficient capital management for investors and fund managers. This infrastructure is managed in partnership with Grasshopper Bank, Fifth Third Bank, Piermont Bank, and Silicon Valley Bank. It includes a For Benefit Of (FBO) account program, which holds customer funds in escrow until they are ready to be deployed into portfolio companies or used for other fund activities. Here’s how it works:
- Sub-Accounts for Every Investor: Each investor is assigned a unique “sub-account” within a For Benefit Of (FBO) account structure. These sub-accounts act as “wallets,” allowing investors to deposit called capital and receive distributions securely.
- Wire Instructions and Memo Codes: Each sub-account has distinct wire instructions, including a mandatory memo code, to ensure funds are routed correctly. This setup allows AngelList to automatically match deposits to the correct investment.
- Transaction Workflow: Funds flow from an investor’s sub-account to the fund’s account for contributions and are deposited back into the sub-account for distributions. Investors can then withdraw distributions to their personal or business bank accounts via wire or ACH.
The KYC process is essential to activating these sub-accounts, as AngelList cannot facilitate contributions or distributions on behalf of funds without verified information. It ensures compliance with regulatory requirements and banking partner standards by verifying each investor’s identity and collecting necessary details about control persons and, when applicable, beneficial owners.