KYB Verification Services: An Ultimate Guide for Modern-Day Businesses in 2023

By: Alex James

Establishing trust has become challenging in the modern world because of shell companies and other fraud cases. The application of KYB verification services can help businesses discourage fake corporations. This way, genuine companies can only establish partnerships with real enterprises. It facilitates compliance with KYC & AML regulatory obligations and secures a strategic advantage for users. Hence, the innovative approach can strengthen relationships with the clientele base and boost yearly revenue for the concerned company. 

The following sections of the article will discuss the importance of know your business services and other essential points that all modern-day enterprises must know. 

Know Your Business Services: A Quick Insight

KYB is a validation standard that helps companies confirm the legal position of a corporation and its compliance status with AML & KYC regulatory obligations. Applying KYB services by a bank or an insurance company can help protect the business interest of concerned entities and discourage shell companies. This way, corporations can ensure the authenticity of business partners and deter fraudulent practices in the corporate sector. To add, KYB includes Ultimate Beneficial Owners (UBOs) as a transparency mechanism. 

Establishing UBOs reveals the entity that benefits from the profits of the organization. This advanced approach makes it tough for criminals to hide illicit money. In case of failure to implement KYB systems, the company can face a loss of brand reputation, low profits, and other legal penalties. 

There are similarities between the KYB and KYC services. However, the difference lies in the audience or clients that companies deal with. KYC applies to individual customers, whereas KYB is applicable to corporations. 

Know Your Business Services Regulations

KYB solutions are generally perceived as an extended version of KYC. Know your business verification is a recent development but know your customer protocols came into existence early on. 

In Europe, lawmakers upgraded international regulations by introducing the 6th AMLD. The Financial Crimes Enforcement Network (FinCEN) introduced KYB checks in CDD requirements for financial institutions. 

Top 5 Data Points that Know Your Business Services Procedure Collects

Since KYB has a close link with a country which makes jurisdiction is an important factor. As a general rule, the innovative system collects various data points of a business. The following points highlight the information which KYB checks gather:

    1. Basic Registration Information: This includes a company’s name, registration code, VAT encryption, legal address, phone number, and fax.
    2. Share Capital: Complete or incomplete data regarding authorized capital such as capital status (paid or unpaid), and start date.
  • Official Beneficiaries: Data about beneficiaries is collected directly from business registries.
  1. Calculated Beneficiaries: This information about beneficiaries is collected through shareholders.
  2. Shareholding: Essential data about the relationship between directors and shareholders.

Complying with KYB Verification Solutions

KYB regulations worldwide require a business to examine the risk associated with a business partner. For this reason, modern-day companies must implement a suitable AML strategy having the following steps: 

  • Due Diligence: This is about establishing Ultimate Beneficial Owners (UBOs). Identifying the UBOs of a business facilitates risk evaluation. In case of higher risk, companies must perform Enhanced Due Diligence (EDD) before establishing business partnerships. 
  • PEP Screenings: An organization must screen corporate relationships to identify politically exposed persons (PEPs). Corporations having PEP entities are at high risk because of the high potential for political exploitation. 
  • Sanction Screenings: The limitations on the economic flow that a country imposes on another region must be followed. Concerned organizations must execute checks on the company & its workers. 
  • Adverse Media Screenings: A business’s market reputation can be easily evaluated by checking news coverage about it. Regular monitoring provides ongoing updates in the media when a company faces challenges. 
  • Transaction Monitoring: It is about analyzing a business’ monetary exchange activities that can provide important information regarding the risk status. For example, large volumes of monetary exchange to high-risk jurisdictions can indicate instances of money laundering or terrorism financing. 

The Bottom Line

The implementation of KYB verification solutions demands massive volumes of data which becomes cumbersome in the case of manual procedures. For this reason, the use of AI-driven KYB solutions can help companies and enable workers to use digital tools and streamline the onboarding procedure. Experts can easily cross-check data from IDV procedures with the company’s employee lists to identify fake information. 

Teaming up with a vendor can help companies implement a PCI DSS-compliant KYB verification solution and secure a strategic advantage. The innovative service can easily mitigate fraud while saving time & resources for the company. 

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