Key Takeaway
1. KYB verifies a company’s legitimacy, ownership, and documents before doing business to prevent fraud, money laundering, or financial crime.
2. KYB protects businesses and financial institutions by detecting fraudulent companies, ensuring regulatory compliance, and reducing risk exposure in partnerships.
3. Regulatory compliance is critical. KYB helps companies stay compliant with AML and CTF regulations, avoiding fines and reputational damage.
Before we dive into the step-by-step process on how to perform a KYB (Know Your Business) verification check, let's explain the key terminologies:
Interesting read: What is Business Verification?
What is the Know Your Business (KYB) verification check?
KYB verification check, or KYB, is the process of confirming a company's or business's identity before doing business with them. It is basically the business version of KYC (know your customers).
Instead of just verifying an individual’s identity, KYB checks verify that a company is real, legitimate, and trustworthy.
A report from the Federal Trade Commission (FTC) shows a massive jump in losses of $12.5 billion in 2024 due to fraud. The number of customers who reported fraud and money loss increased in 2024 to 38% compared to in 2023, when it was 27%.
This data shows scammers' tactics are constantly evolving, and financial institutions such as banks need to do effective KYB/KYC verification checks before going into business with any company.
KYB checks involve verifying that the business address, business name, and registration number match official government records, and also verifying that there are no links to fraud, money laundering, or terrorism financing.
Why is KYB verification important?
The KYB verification is designed to ensure that banks and compliance officers build a safe, trusted, and long-lasting business relationship. The KYB verification checklist is the first line of defense against risk as a fintech onboarding merchant or a corporate leader partnering with a new business.
The KYB process covers
1) Business registration checks (Is this company legally registered?)
2) Ownership verification (Who really controls it? Directors, shareholders, UBOs)
3) Document validation (Licenses, certificates, tax documents)
4) Sanctions and watchlist screening
5) Ongoing monitoring (Has anything changed after onboarding?)
Why is KYB important for financial institutions?
Every transaction, partnership, or onboarding decision carries a certain level of risk. This is why Know Your Business (KYB) checks have become essential for businesses in the financial sector.
KYB goes beyond surface-level customer due diligence. KYB verification digs into the structure, ownership, and legitimacy of the businesses that banks and fintechs engage with.
1. KYB verification protects your business from fraud:
KYB verification checks ensue to detect and prevent you from signing contracts with businesses that don't even exist or ones that exist only to launder money.
2. Stay Compliant with Regulations:
There are financial rules and regulations about Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF). The KYB checklist keeps you compliant and prevents costly fines or legal trouble.
3. Build Trust with Partners and Customers:
In business, trust is everything. KYB identity verification can prove that your partners are legitimate and, in turn, strengthen your brand reputation and make it easier to form long-term partnerships.
4. Reduce Risk Exposure:
Every new vendor, client, or partner is a potential risk. KYB checklist minimizes that risk by making sure you know exactly who you’re dealing with before you sign on to the business relationship.
6 steps to perform the KYB verification check.
KYB verification process basically confirms the validity of a company or business before going into business with them.
So, how do you actually perform a KYB check? Let’s walk through it step by step.
1) Collect Company data
The first step is to verify the business registration, using the company’s data and documents provided by the individual representing the business to confirm that the company exists legally. Documents or information such as the business name, address, tax identification number, and so on. This is the foundation. If the business isn’t properly registered, that’s a red flag right away.
2) Identify the Directors and Key Management.
KYB verification requires gathering information about the directors, shareholders, and company secretaries. In this step, their identities must be verified with valid ID documents to ensure they are who they claim to be.
3) Cross-check Ultimate Business Owners (UBOs).
A UBO is the real person or group of people who ultimately benefits from or controls a company, even if ownership is hidden behind layers of other companies. In this step, the real individuals are identified. After the UBOs have been identified, firms can conduct a KYC check on each of the real owners, the real humans pulling the strings. This is where KYB goes deeper, from knowing the business to knowing the customers (KYC).
4) Collect and Validate Key Documents.
The next step is to validate the key documents. Important paperwork that backs up the company’s existence, such as articles of association, shareholders' registers, licenses, and permits. These documents reveal the structure and nature of the business.
5) Use AML Screenings
In this step, companies perform anti-money laundering (AML) screening, which involves screening the business and the individuals associated with it against the global sanction list and adverse media sources.
AML screening in KYB helps identify risks associated with individuals involved in money laundering, sanctioned entities, and wanted criminals.
For example, Youverify AML watch list screening has various custom rules that help streamline AML checks, such as
1) AML screening check:
Just like the standard Anti-Money Laundering check, the Youverify KYB verification solution is designed for specific high-risk beneficiaries like UBOs and directors, checking against sanctions and PEPs lists as part of the workflow.
2) Transaction Monitoring:
Youverify’s KYB software offers continuous monitoring of customers' transactions, analyzing any unusual activity or pattern, such as movement of an unusual amount of money or rapid movement of funds between accounts.
3) Watchlist screening:
The Youverify KYB verification solution offers the verification of individuals, businesses, and companies against the global watchlist to identify businesses with potential risks, such as involvement with financial crimes or politically exposed persons (PEPs).
6) Conduct Ongoing Monitoring:
It's not just enough to check a company on the watchlist. Companies use the ongoing monitoring stage to sustain an accurate customer profile. KYB verification check involves continuous ongoing monitoring. Businesses change ownership, new risks emerge, and compliance rules evolve. Continuous monitoring ensures you stay updated if a once-legitimate client suddenly becomes high-risk. A KYB solution allows companies to monitor changes in a customer's AML risk profile.
Frequently Asked Questions
Q1) Are KYB and KYC the same?
They both involve verification of identities. The key difference is the customers you are dealing with. KYC involves the verification of the identity of individuals, while KYB involves verifying business identity.
Q2) What is KYB check?
KYB check is the process of verifying a business or an organization before doing business with them. KYB is basically the business version of KYC.
Q3) What is KYB for banking and fintech?
Know your business is a set of verification rules that helps financial companies avoid getting into business with criminals
Achieve KYB verification with Youverify.
Businesses can’t afford to rely on assumptions when it comes to starting a partnership with other companies. KYB verification ensures that every partner, transaction, or onboarding decision is built on transparency and legitimacy.
Youverify offers a comprehensive KYB verification solution that helps fintech, financial institutions, and global businesses verify every partner or company before establishing a business relationship, thereby eliminating fraud and meeting regulatory standards.
With Youverify KYB identity verification software, it is easier to onboard clients and improve your customer experience seamlessly. To get started, book a demo today.