Know Your Business: A Must to Save you from Shell Companies

  Know Your Business (KYB) refers to the Verification of corporate business entities it’s the scrutiny of corporate entities associated with your business. It involves verification of Ultimate Beneficial Owners (UBO), third-parties, and businesses you are dealing with. Just like KYC that involves verification of onboarding customers against several parameters that are enough to authenticate an identity, KYB ensures verification of corporate businesses with which you are dealing.

Global and local regulators are stringent with respect to the examination of UBOs and business entities with which your business operates. Strict regulations are there regarding businesses that they should work with the registered entities to avoid the possibilities of risks. These risks could be related to knowingly or unknowingly facilitation of money laundering or terrorist financing, or unauthorized access to confidential information of user data

Know your business (KYB) is a regulation that requires businesses to perform due diligence on other businesses related to them. Either it is a B2B, partnership, affiliation, or a goodwill relationship, reporting entities are required to verify their prospects before initiating any sort of business relationship. KYB requires the businesses to verify the businesses and their UBOs (Ultimate Beneficial Owner) for compliance’s sake. It ensures transparency in a business relationship and effective implementation of Anti Money Laundering (AML) and Counter Financial Terrorism (CFT) regimes.

How is KYB different from KYC?

KYB is a part of KYC and AML regulations. KYC requires businesses to perform due diligence on their customers (Individuals) while KYB requires them to perform due diligence on the businesses related to them. KYC is identity checks of customers before onboarding to mitigate the risk related to fake customers like money laundering, identity theft, account takeover, etc that can cause businesses to trouble. 

Steps of KYB Process:

                 Know Your Business KYB services include the following steps:

  • Anti Money Laundering AML checks

                This measure is to ensure that the business one is dealing with is all clear and is not involved in any kind of AML activity. This check is to know if any business is found to be notorious for acts like money laundering.

  • Document Verification

                   All the documents of any business have to be authenticated to ensure that it’s not a shell company and is a legitimate company to deal with. Proper document verification has to be done as stipulated by the regulations.

  • ID Verification of Owner:

                     The identity of owners and stakeholders of a business have to be verified to make sure that they are not involved in any fraudulent activities. The true identity of a person owning a business is validated.

Why Businesses need KYB?

Identity verification solutions should be integrated into the system of businesses to stay a step of cybercriminals and fraudsters. Cybersecurity should be a top priority of businesses to protect their data and to b on the safe side. Ever since the introduction of the AMLD 5, the regulation requires the verification of the business and its UBOs against the data found in the central companies register. Where KYC is solely focused on the verification of individuals, performing KYB allows a better vetting of the business customer. 

            A business that does not have the requisite verifiable details against a central register opens the way for doubt. A business with such characteristics can raise a red flag on suspicion for non-transparent business activity. KYC and KYB in parallel is an effective way for companies to prevent themselves from future financial repercussions.

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