Know Your Business (KYB) is a relatively new concept compared to Know Your Customer (KYC) compliance. However, the KYB version of corporate entity verification is much more complicated or at least require more manual work or expert skills, as its scope applies to both standard business information (such as the company’s name, registered address, licensing documentation, etc.) and information about related persons (such as directors, board members, shareholders, third-parties, etc.).
Manual, lengthy operations in KYB verification, such as asking company officials to add extra info and upload documents through back-and-forth emailing, can result in slow onboarding and frustration. That’s why many businesses prioritize finding the balance between the right amount of automation and setting optimal steps for the end-user while complying with KYB.
How Does Know Your Business (KYB) Verification Work?
Know Your Business verification, or KYB verification, consists of multiple steps designed to assess a company and its ownership structure. This helps uncover discrepancies, for example, such as legal implications, sanctions, suspicious address/office data, hidden true owners of the company, sometimes, even money laundering schemes, for example, which happen using offshore accounts.
In practice, this means all directors, Ultimate Beneficial Owners (UBOs), and related persons need to be KYC’ed, and official information, such as licensing agreements, needs to be collected from the business that is going through the KYB check. Then, other verification methods, such as database verification, where the onboarding details are compared and cross-checked with another reputable source, often a government registry or credit bureau, are used for Secretary of State (SOS) lookups, EIN verification, and other important details for KYB compliance.
What’s the Most Common Issue With KYB Compliance?
For big companies that need to check all vendors, third-party service providers, and potential partners, handling such volumes without KYB software is simply impossible. Some KYB solutions can not only offer streamlined KYC and document verification for the company’s UBOs but also provide direct access to important KYB databases like the SOS portals to verify whether a business is legally registered and active.
With KYB, you should be able to:
- Prepare for stricter regulations in emerging markets and expect stricter regulatory scrutiny in various countries.
- Align your KYB processes with current compliance standards as a baseline.
- Choose a global KYB provider, such as iDenfy, with expertise in both local and international laws to scale faster.
- Monitor all KYB clients continuously to detect risk changes early and avoid penalties.
Looking up multiple sources and portals for KYB can be both costly (extra hidden fees) and impossible (data gaps where another source is then needed), which results in slow onboarding for the entity. This also damages ongoing monitoring and continuous due diligence, which is required later in the client lifecycle in order to detect suspicious activity, changes in the customer profile, such as potential sanctions or PEP status changes. Without automation, the only way to keep up with this volume of data is to keep tons of Excel spreadsheets and collect information via thousands of emails, which is simply not sustainable and not a scalable solution.
The Importance of Automated KYB Solutions
KYB software shows tags with highlighted mismatches after verification and AML screening results and pinpoints risks if any discrepancies and suspicious red flags were found during this business background check. Additionally, with automated KYB, you can create a swift and simple onboarding experience for the client, minimizing the time between data submission and approval.
But is it really necessary to invest in some sort of KYB solution when dealing with your corporate clients? We explain why we’re pro-KYB-automation in our guide.
What’s inside:
- Core steps to verify companies and beneficial owners
- Jurisdiction-specific KYB compliance tips
- Red flags and risk indicators during KYB onboarding
- Tools to automate KYB compliance and reduce friction
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