The Know Your Business (KYB) process is not much different from the Know Your Customer (KYC) process. The difference is that KYB initially focuses on companies and suppliers, then processes that focus on consumers or customers. Any financial institution that deals with money transfers must check the KYB of companies that they do business with.
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 the business that Corporate businesses deal with is a legal or shell company. KYB verifies the corporate information of the companies' potential customers and the personal information of the high management that manages the operations of that customer company.
In addition to legal considerations, companies have responsibilities to know the Ultimate Beneficial Ownership (UBO) they do business with. 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 UBO structure with Customer Due Diligence (CDD).
Companies develop Know Your Business processes to comply with various regulations such as anti-money laundering (AML) regulation and counter-terrorist financing (CFT). KYB procedures are carried out to prevent possible money laundering crime of companies or risks of terrorist activities, thereby complying with mandatory international AML Regulations.
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), as well as those of the shareholders holding 25% or more of the company's shares. After verification of the identities, companies continuously monitor the relevant institution's activities to ensure their partners' risk profiles. The ultimate goal here is to identify and evaluate any suspicious activity KYB process protects companies from being accidentally used for money laundering or terrorist activities, and also helps avoid unwanted fraud in their accounts.
If verifying a business owner's identity, examining the ownership structure and documents of a company, determining the identity of its beneficial owners 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 analyzes, global corporate records, PEP, and Sanctions database data are used when analyzing final beneficiaries and shareholders. In addition, continuous monitoring and automatic controls ensure that businesses remain compatible at all times. 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.
All financial institutions that make money transfers, for example, banks must verify the KYB, such as. 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 also guarantee the security of transactions. Besides, To comply with current money laundering regulations, KYB procedures must be carried out in full. Financial ınstutions that comply with AML regulations protect themselves from fines and loss of reputation.
The requirement KYBis specified in the 4th AML Directive in Europe. According to the 4th AML Directive, reasonable precautions should be taken in order 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 documents and information obtained from a reliable source are not identified and verified by the customer. Secondly, in companies, the rights holder is identified, 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.
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