The Perfect “Know Your Business” Checklist for Staying KYC Compliant

Customer identity verification is a crucial step for on boarding legitimate customers. But what about the business entities that your company interacts with? Authentication and verification of a company are as important as knowing individual customers. This is because fraudsters often target these entities to carry out illegal activities. These can range from data breaches and account takeovers to money laundering and terrorist financing. Because of this, “Know Your Business” checks, or KYB for short, have become highly essential for the sustainability of companies. 

Understanding the KYB Customer Service 

Know your business refers to the review process of a company that is necessary for detecting any suspicious activity that might be taking place. In the due diligence review process, legitimate vendors and third parties are identified from a sea of fraudsters. This also allows the company to avoid transacting with shell companies that may be involved in illegal acts such as money laundering. 

What are the Key Elements of the KYB Process?

By integrating certain APIs into the system, companies can effortlessly stay compliant with global KYC regulations. The KYB service collects customer data and analyzes it through an AI-powered, fully automated process. As a result, each document provided by the client business is scanned and verified within seconds, eliminating the risk of any fraud that might occur. That being said, the following are the key components of the KYB process.

  • Business Identification 

Similar to how companies verify the identity of a customer, a client business also needs to be identified. For this purpose, the following information about the business entity is collected and analyzed:

  • The current business status
  • The jurisdiction where the company operates
  • The industry sector the company falls in 
  • Information regarding the Ultimate Beneficial Owners (UBOs)
  • The registered business address
  • The company’s trademark
  • Any past modifications to the company’s name
  • Authenticating Business Filings

In this step, the client business is required to provide certain documents for the purpose of immediate verification. After these documents have been authenticated and their legitimacy has been analyzed, the next step begins. 

  • Business Network Verification

The next step is to verify the existence and legitimacy of the parent and sister companies that the client firm is in a business relationship with. This step is crucial for risk mitigation and fraud prevention as any suspicious activity is uncovered during this step. 

  • Business Statement Analysis 

Another key step that takes place during the know your business process is an in-depth analysis of the company’s business statements. This allows the business to become aware of the client company’s managerial systems. In this step, changes in the board of directors and shareholders are identified. 

List of Information That is Verified 

By performing know your business verification, key characteristics of the business entity are authenticated. Here’s a list of information that is typically collected and verified during the KYB process:

  • Company name 
  • Jurisdiction code
  • Date of incorporation
  • Registered address
  • UBO
  • Branch status 
  • Industry code
  • Trademark 
  • Historical data

The Importance of KYB Verification 

With the world becoming more digitalized, security measures have to keep up. Know your business verification is one way of staying modern, fraud-free, and KYC compliant. Verification of client business, its associated companies, vendors, and affiliates is necessary for creating a wider picture. This allows the company to employ KYB checks to keep an account of all the business activities taking place. 

  • Fraud Prevention 

Financial scams are a recurring problem for industries worldwide. By verifying every aspect of client business, a substantial amount of losses can be prevented beforehand. For instance, a bank can verify the UBO’s of a business entity to identify any criminal history of the owners. This way, established business organizations or Politically Exposed Persons (PEPs) can be kept under close monitoring. 

  • Regulatory Compliance

A final benefit that must be mentioned is that KYB verification allows a company to stay compliant with KYC and AML (Anti-money Laundering) regulations. These regulations are mandatory for business sectors such as the financial industry and have the goal of minimizing the risk of fraud. Since money laundering and similar illegal activities have dire consequences on the economy, non-compliance to AML regulations can lead to hefty fines, penalties, and charges on top of facing reputational damage. 

With KYB checks in place, compliance targets can be met, fraud can be prevented, and strong business relationships can be formed in a single go.