With the advancements in the business world, ways to deal with corruption, money laundering, and fraud have been discovered. The worldwide acknowledged anti-money laundering AML regulations are the way to tackle such risks. 

KYB solutions assist to verify a business through collecting the data and screen it against the databases. Verifying a business is a way to counter money laundering and other financial risks. Financial institutions must rely on KYB procedures to have cash flow transparency and establish a reputation in the finance industry.  

What is KYB Know Your Business?

Know Your Business is investigating the company's legitimacy while onboarding. Any corporation must apply KYB checks on companies to determine their legal status. This third-party due diligence builds trust in two ways:  

  • The company in question is genuine and legitimate, so it is safe to do business with
  • The company's entities are not involved in financial crimes or suspicious activities

What Purpose Does Know Your Business Verification Serve? 

KYB is the set of measures applied to the company to verify it. The primary purpose of KYB is to identify and verify the business and the entities behind it. Conducting the KYB gives confidence to the financial institution that it is onboarding authentic and legal companies. Additionally, the potential threat gets identified to counter the company that is involved in nefarious activities.  Companies involved in bankruptcy, terrorism financing, money laundering, and criminal activity are exposed to the threat. For those risky profiles, ongoing monitoring under KYB solutions helps to verify a business and mitigate future challenges.  

Risks of Not Verifying Businesses

Avoiding KYB protocols is an exposure to threats and risks. There are potential risks involved if corporations avoid KYB checks while building financial relations. Some of them are mentioned below: 

  • Frauds
  • Sentences
  • Hefty fines
  • Reputational damage 

Important Steps to Verify a Business

In KYB, there are important steps involved in verifying a business to ensure safe financial relations. Let's discover how to verify a business step-by-step 

  • Understand KYB Compliance Requirements

Corporations must understand the anti-money laundering AML and counter-terrorism financing CTF regulations. Other acts, such as the Patriot Act, and the Bank Secrecy Act BSA also need to be understood. Before onboarding the company, conduct KYB checks to find its compliance acts and secure legal status.  

  • Verify the Business Entity

Along with business, corporations must verify the entities behind that. The identification of business people is a crucial point in business verification. Collect the company name, address, registry number, and contact number. The company's documentation must be gathered such as financial documents, balance sheets, income sheets, and tax payment records. Additionally, all the certificates and permits relevant to the specific industry to verify a business in which the business operates must be collected. 

  • Cross-Reference Checking 

After collecting the data and documents, check the anti-money laundering watchlist, politically exposed people's PEPs list, and other watchlists to screen company names against those databases. 

  • Ultimate Beneficial Owner UBO Verification

The Ultimate Beneficial Owner (UBO) of the company is someone who controls or owns 10-25% of the stake. UBOs may include the company's beneficiaries, directors, and shareholders. Analyze the documentation of the UBO relevant to the business, including the passport and license. KYB checks are applied to beneficial owners to ensure their non-involvement in watchlists and fraudulent activities.   

  • Monitor Up-To-Date Information

Ongoing monitoring is essential to keep financial relations on track. There is a chance that a company that AML compiled while onboarding may get involved in suspicious activities later. Being updated through Know Your Business Solutions helps corporations assess risks on time and mitigate them accordingly. 

Conclusion

KYB Know Your Business is the due diligence procedure to review the company data and documents. KYB procedures collect, analyze, and cross-check the data to verify a business. Apply KYB checks to determine the legal and financial status of the company. Corporations must review the databases against company documents to find the potential risks and fraudsters. As a result, secure financial relations are built, which opens the way for a reliable reputation in the market. Once a corporation verifies a Business, it will have great peace of mind.