Phoenix American — Aviation Platform Operations and Administration

Compliance Brief: Practical compliance for aviation and fund structures

 

KYC and customer due diligence in ABS and Fund Structures

Know your customer (KYC) processes and customer due diligence (CDD) obligations are standard requirements across financial services. In aviation asset-backed securitisations (ABS) and fund structures, however, they also function as a practical dependency for transactions, onboarding and ongoing operations. This post looks at how KYC and CDD affect the day-to-day running of ABS and fund vehicles and how to keep them from becoming sources of delay.

Why KYC matters in structured environments

Aviation ABS and fund structures typically involve multiple entities, jurisdictions and counterparties, including trustees, servicers, liquidity providers and aircraft lessors. Investors, lenders, service providers and intermediaries may all require KYC documentation at different points in the lifecycle.

In this environment, KYC is not a one-time exercise completed at formation; most Anti Money Laundering (AML) frameworks require ongoing monitoring and periodic refreshes based on risk and triggering events. It is a recurring requirement that sits alongside capital flows, governance and reporting. If documentation is incomplete or inconsistent, the immediate impact is often practical rather than theoretical. Transactions pause, onboarding is delayed and internal teams spend time resolving issues that could have been addressed earlier.

Treating KYC as part of the operational framework, rather than as a separate compliance task, helps reduce this friction.

Where KYC presents issues

KYC challenges tend to appear in predictable places.

At investor onboarding, delays often arise where beneficial ownership information is incomplete or where documentation does not meet the standards of all relevant parties. In cross border structures, different interpretations of requirements can lead to repeated requests for the same information.

During the life of a structure, changes in ownership, transfers of interests, servicing changes or the addition of new counterparties can trigger fresh KYC requirements. Where records are not maintained centrally, teams may need to reconstruct information that was previously available.

Financial institutions involved in a transaction, including banks and custodians, will typically apply their own KYC standards. Even where a structure has already completed due diligence for one party, that work is not always transferable. In many jurisdictions, regulated firms remain responsible for satisfying their own AML obligations even where prior due diligence has been completed by another party. This can lead to duplication and extended timelines, particularly where closing dates are fixed.

These issues are not unusual, but they are avoidable with the right approach.

KYC across the lifecycle

Looking at KYC through a lifecycle lens helps clarify where attention is needed.

At formation, initial due diligence establishes the baseline for ownership and control. During onboarding, that information is expanded to meet the requirements of administrators, banks and other service providers. Over time, changes in investors, directors or counterparties mean that KYC information needs to be refreshed and, in some cases, revalidated.

Events such as refinancings, restructurings or ABS issuances often bring new parties into the structure, each with their own requirements. At these points, the quality and accessibility of existing KYC records directly affect how quickly the process can move.

In aviation structures, KYC processes are also closely linked to sanctions screening, lessee exposure and jurisdictional risk assessment.

Periodic reviews, whether driven by internal policy or external regulation, provide another checkpoint. If information has been maintained consistently, these reviews tend to be straightforward. If not, they can become time consuming exercises.

Coordination and consistency

One of the practical challenges with KYC is coordination between different parties.

Administrators, directors, banks and other service providers may each hold elements of the overall KYC picture. Without a clear view of who is responsible for maintaining and updating documentation, gaps can develop over time.

Version control is another common issue. Documents may be circulated and updated across multiple teams, with no single source of truth. This increases the risk that outdated information is used in a transaction or submitted to a counterparty.

Establishing clear ownership of KYC processes and maintaining a central, up to date record of documentation helps address these issues. It also reduces duplication, as the same information can be provided to multiple parties in a consistent format.

Process disciplines that reduce risk

A small number of process disciplines can make KYC and CDD more predictable.

Maintaining a central repository of KYC documentation for each entity and investor helps ensure that information is accessible when needed. Using standardised checklists for onboarding and transaction processes reduces the chance that key items are overlooked.

Assigning responsibility for KYC to a specific function or team, with defined triggers for updates, helps keep information current. These triggers might include changes in ownership, new transactions or periodic review cycles.

Early engagement with counterparties on their specific KYC requirements can also reduce delays. Understanding what each party will require, and in what format, allows documentation to be prepared in advance rather than during time sensitive phases of a transaction.

Making KYC a non-issue

For aviation and fund structures, KYC and CDD are expected parts of the operating environment. When they are managed well, they do not draw attention. When they are not, they can quickly become a source of delay and frustration.

By treating KYC as an operational process, maintaining consistent records and coordinating effectively across parties, these requirements can be handled in a predictable way.

With those elements in place, KYC and customer due diligence become routine features of onboarding and transaction execution, rather than obstacles to progress.