Know Your Business (KYB)

The Know Your Business (KYB) process is not much different from the Know Your Customer (KYC) and Know Your Client process. The difference is that KYB initially focuses on companies and suppliers, then on consumers or customers. Any financial institution dealing with money transfers must check the KYB of companies they do business with. 

What Is Know Your Business (KYB)?

One circumstance was overlooked when the USA Patriot Act was declared, and KYC was considered an essential step in preventing money laundering and terrorist financing. The companies that are subject to the regulations of the chamber regulators could not comply with this regulation. Unfortunately, this process continued until this situation was noticed and added to the KYB CDD rules in 2016, and financial criminals benefited from this deficit. After this process, many regulatory institutions such as the United States incorporated KYB into its structure.

Know Your Business (KYB) verification is a company's Anti-Money Laundering compliance. Companies must protect their interests before doing business with another business. Companies need to know if their income is misused by corrupt business owners, shareholders, and money launderers. For this, the Know Your Business applications determine whether corporate businesses deal with a legal or shell company. KYB verifies the companies' potential customers' corporate information and the personal information of the high management that manages the operations of that customer company.

In addition to legal considerations, companies must know the Ultimate Beneficial Ownership (UBO) they do business with. So, what is UBO? UBO meaning is the legal entity that is the beneficiary of the company. UBO definition must be done in a company, company UBO check, and UBO verification. Shell companies are hiding billions of dollars of hidden funds from legal taxes, and these funds fall into the hands of people who have a strong tax burden. Doing business with these people can undermine companies' reputations. Therefore, KYB should review the UBOs structure with Customer Due Diligence (CDD).

What Are KYB Procedures?

Companies develop Know Your Business processes to comply with various regulations such as Anti-Money Laundering (AML) regulation and Counter-Terrorist Financing (CFT). KYC/KYB procedures are carried out to prevent possible money laundering crimes of companies or risks of terrorist activities, thereby complying with mandatory international AML Regulations. KYB regulations are where companies do business together and are in contact. Requires collecting and analyzing the data of other companies.

these data;

registration documents

address of the company

license documents

are the identities of managers and owners.

The companies fulfill the requirements of KYB by verifying various information and obtaining documents from reliable sources. These documents include the company's business register and the identities of the Ultimate Beneficial Ownership (UBO) and those of the shareholders holding 25% or more of the company's shares. After verifying the identities, companies continuously monitor the relevant institutions' activities to ensure their partners' risk profiles. The ultimate goal here is to identify and evaluate any suspicious activity. The KYB process protects companies from being accidentally used for money laundering or terrorist activities and helps avoid fraud in their accounts.

Automated KYB Compliance

If verifying a business owner's identity, examining the ownership structure and documents, and determining its beneficial owners' identities is done by traditional methods, it is quite time-consuming. For this reason, companies that want to comply with AML regulations and protect their businesses use electronic identity verification (eIDV) to automate the verification process. Companies provide easy access to KYB compliance with electronic authentication.

State analyses, global corporate records, PEP, and Sanctions database data are used to analyze final beneficiaries and shareholders. In addition, continuous monitoring and automatic controls ensure that businesses remain compatible. In automated KYB procedures, companies obtain and validate official commercial registration data using APIs. Along with the business authorization code, the digital KYB service can collect important information for the business.

Institutions That Require KYB Procedures

All financial institutions that make money transfers, such as banks, must verify the KYB. In addition, companies must analyze and verify the business and financial information of their partners from all over the world. In this way, companies protect themselves from document fraud and guarantee transactions' security. Besides, KYB procedures must be carried out in full to comply with current money laundering regulations. Financial ınstutions that comply with AML regulations protect themselves from fines and loss of reputation.

The Meaning of KYB in Europe

The requirement KYC/KYB is specified in the 4th AML Directive in Europe. According to the 4th AML Directive, reasonable precautions should be taken to know who the ultimate beneficial owner is, and the ownership and control structure of the customer must be understood. Moreover, There are some KYB requirements in the EU. For example, in Europe, the customer does not identify and verify the documents and information obtained from a reliable source. Secondly, the rights holder is placed in companies, and measures are taken to verify this person's identity. Then, the purpose and quality of the business relationship are evaluated. Finally, business relations are monitored continuously.

With Sanction Scanner, you can scan the Institute and protect your reputation by securing your collaborations and avoiding risks.

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