Know Your Business (KYB) is a verification procedure to evaluate the company’s legal status. This involves the investigation of the business’s financial documents through KYB checks. Financial institutions need business verification while onboarding the firms to know their legitimacy. Companies that comply with anti-money laundering, counter-terrorism financing, and other regulations are safe to become partners.
Fraud prevention is one of the main aims of knowing your business through detailed procedures. Knowing your business and the people operating with that business is needed to monitor it in order to prevent financial crimes. KYB Verification helps combat money laundering and other suspicious activities.
Know Your Business Verification
Knowing your business verification involves gathering business data to check it against legal authorities’ databases. Know Your Business is ongoing due diligence to monitor business performance and relations concerning legislation. Evaluating the intended nature or purpose of the business assists in determining its legal status.
Ultimate Business Owner (UBO) identification is the main component of the KYB procedure. It involves gathering information about the company’s beneficiaries, directors, and shareholders. Once the UBO is identified, the next step is to check his credibility by screening his details, documents, and position in the finance industry. UBOs who comply with AML and CTF regulations minimize the risk of financial crimes.
KYB Requirements
In the KYB procedure, corporations need to identify and verify data relating to other companies before making bonds. Through this procedure, the legitimacy of the company needs to be examined. Businesses must review information that includes:
- The company name
- The company address
- Registration number and documents
- Licensing documents
Firms also need to verify the information of the ultimate beneficial owners to establish a secure financial bond. UBOs with 25% or greater ownership and directors need to be identified. UBOs’ legal addresses and documents, such as passports and driving licenses, must be assessed. UBOs must ensure their non-compliance with money laundering and terrorism financing.
What is the Know Your Business KYB Process?
The KYB process is due diligence to determine whether businesses comply with financial activities. This process involves verifying the corporation’s identity, ownership structure, and activities. One of the main reasons behind this procedure is to check business compliance with AML and CTF regulations to prevent potential risks.
Adverse media screening is also essential in due diligence when searching for business news. News archives, television, social media posts, websites, and other resources are platforms that provide news about business or business people. In negative media screening, the news is checked to identify the potential threats relevant to that business.
Once the company is onboarded, enhanced due diligence is required to monitor high-risk profiles. Shell companies, fintech companies, or companies involved in money laundering or terrorist financing need regular checks and balances. KYB will help prevent fraud and, ultimately, no threat of hefty fines.
Basic Steps in Know Your Business KYB Checks
KYB is closely tied to the laws of the relevant country. Some of the essential KYB checks list are mentioned below:
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Basic registration information
It includes the company name, address, registration number, registration date, share capital, legal address, internet address, email, and phone number.
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Official beneficiaries
Its requirements include information about beneficiaries, directorship, shareholding, and managers. UBO names must not be present in the politically exposed people (PEPs) list, watchlist, or any sanction list.
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Employees information
It may include information about the last ten years of employees to understand company culture.
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Debts To Third Parties
It includes claimant, debt amount, debt remainder, payment status, and start date.
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Tax debts
It includes debt amount, remainder, payment status, and start date.
In Conclusion
Know Your Business KYB is an important part of regulating business operations without any risk of financial crime. Ongoing diligence monitors daily business transactions to identify any suspicion on the record. KYB ensures business compliance with AML and CTF regulations. A successful KYB check guarantees that corporations are dealing with legal companies. As a result, criminal activities and financial risk stay away from the business and locate the red flag, if any. Additionally, the KYB process prevents fraud and builds business trust in the market. Rely on the KYB process to mitigate the challenges on time!
