Know Your Business (KYB)

Businesses that transact with other companies need to be more careful while initiating B2B relationships. Money launderers and terror financiers try to exploit by using unregistered and unverified companies to conduct bad business. Poor and inefficient due diligence can result in unwanted involvement of businesses in money laundering, terror financing, fraud cases and other criminal activities. Hence, it is essential to identify and verify corporate firms you are entering in business relationships to secure your business from fraud and regulatory fines.

What does know your business (KYB) mean?

Know your business (KYB) or business verification is the due diligence review of an organization against money laundering and sanctions data. It enables your business to create policies and assess suspicious activities and transactions. Following KYB checks can help corporations ensure that they are doing business with a legit organization, not a shell corporation that is present only on papers.

Regulatory bodies, especially in developed regions, demand proper anti-money laundering (AML) measures for business and document verification while dealing with foreign companies. Guidelines such as Electronic Identity Verification and AML directives in Europe dictate KYB verification laws to corporate entities. 

How does it impact you?

Non-compliance with regulations can lead to risks of exposure to money laundering and terror financing activities. Once a business is nominated in any criminal proceeding, they would have to face dire consequences including damage to brand reputation, penalties, sanctions and in certain cases, a permanent ban. 

According to Fenergo, by the end of July 2020, the non-compliance fines for AML and KYC have reached a total of $5.6 billion. 

What is the process of KYB verification?

Similar to know your customer (KYC), KYB is a verification process in which the authenticity of a business is verified by extracting official commercial register data using APIs. To perform business verification, companies need to follow the following points;

Business search

In business search, background verification is performed on the company, which includes its registered address, company type, current status, UBOs, trademark registration, and previous name of the organization (if any).

Business filings

In business filings, instant verifiable information about an organization’s financials is involved, such as access to financial statements, sources and links to legal downloadable reports  (annual account, shareholder lists, etc.).

Business statements

Business statements help organizations stay on top of changes in management and the company of connecting businesses. Any change in the company’s structure can also reflect on the evolving business environment, indicating the need for follow-up information on company matters.

Business networks

Detailed insight on a company’s network provides information into its parent firms and lists of company subsidiaries like child or sister companies. Other key points to note are the region where the business is registered, the nature of its activities, and the value of transactions it carries out. 

Global KYB trends

Automated KYB compliance

Identity verification of the owners of a business is a time-consuming manual procedure of research into an organization’s ownership structure and documentation. Establishing the identities of a company’s beneficial owners is a cumbersome task, considering the disclosure requirements varying by every jurisdiction. To overcome this hurdle, companies are employing electronic identity verification to automate the verification process. 

The strict and complex regulatory environment has given rise to a sophisticated method for seamless due diligence, which is through an automated system of business verification. Real-time data checks on organizations and searches on directors, UBOs and ID documents make KYB compliance an easy affair.

These automated systems perform verifications by extracting data from:

• Global corporate registries
• Public records and government registers
• Global PEP (Politically exposed person) and sanctions databases