Businesses grow in a secure environment. Otherwise, businesses would approach each other full of concerns. Essentially, not knowing the intention of other businesses, puts a high risk into transacting business which is why KYB is important in establishing business relationships.
In the past, fraudsters could hide their identity behind a business. This allowed for business fraud and money laundering activities. Know Your Business (KYB) was introduced in 2016 by Financial Crimes Enforcement Network (FINCEN).
KYB makes it compulsory for businesses to verify the beneficiaries of the businesses that they served. This approach enables businesses today to know whom they are dealing with before they enter into business transactions.
This article explores KYB, discussing why it is the most secure way to establish business relationships in today’s world.
What is Know Your Business (KYB) in Business-to-Business (B2B)?
Know Your Business (KYB) is a set of steps taken to verify business information. It is important in checking if the businesses are truly who they claim to be.
KYB enables businesses to identify if a business is genuine. It also helps in identifying shell companies.
Know Your Business (KYB) makes it necessary for businesses to implement Anti-Money Laundering (AML) compliance in all their Business-to-Business (B2B) relationships.
How Does KYB Relate to KYC?
KYB is required in a business-to-business (B2B) environment, where there is a need to authenticate new business relationships.
Likewise, Know Your Customer (KYC) Is required in a Business-to-Customer (B2C) environment, where there is a need to verify the identity of an individual customer.
KYB is for business verification, while KYC is for customer verification. In KYB, businesses need to verify the Ultimate Beneficiary Owners (UBOs) in new b2b relations.
These UBOs are individuals that are benefiting from the financial activities of a business. Therefore, KYC is a sub of KYC.
How Does KYB Impact Business Growth?
Know Your Business (KYB) impact the growth of a business in various ways.
1. KYB serves as insurance to form Business-to-Business (B2B) relations
Businesses can confidently make important business decisions. It, therefore enhances secured b2b relationships.
2. KYB makes Businesses scalable
With enough verified identification of information about a new business, business owners could scale their business without fear of involving with fraudsters or shell companies. Essentially, companies can do business together with low risk.
3. KYB encourages transparency in the B2B environment
Once a business is assured of the authenticity of the other business, it accelerates business transactions.
4. KYB reveals UBOs
Businesses can know the individuals who are the ultimate beneficiary owners (UBOs) of the new business they are about to deal with.
5. KYB reduces exposure to corrupt entities
Some businesses are owned by corrupt individuals. The corrupt individuals hide their nefarious activities behind businesses. Essentially, KYB helps businesses to avoid such illegal businesses.
What are KYB Procedures and Regulations for Businesses?
Businesses must perform Know Your Business (KYB) when dealing with new businesses. KYB procedures enable businesses to know the level of authenticity of a new business.
Know Your Business (KYB) regulations require businesses to be Anti-money Laundering (AML) compliant.
The procedure helps businesses to verify that the business they are partnering with is genuine and deceitful. Businesses need to be verified to protect their business interests.
What Are Steps Involved in KYB Verification?
Steps that are required for an effective KYB verification are the following:
Step 1: Business Data Collection
Collection of business data may include verification of the following documents:
- Business name
- Business registration number
- Business country residence
- Business website
- Business register location
- Business postal address
- Business shareholders
- Business UBOs
Step 2. Use of Questionnaires or Forms
Questionnaires are used to collect business information in order to determine the business level of authentication.
Step 3. Ultimate Beneficial Owners (UBOs) Verification
The ultimate beneficiaries of a business, the shareholders and business-authorized representatives are made to undergo KYC verification.
The KYC verification on UBOs, shareholders and business-authorized representatives is to ensure that they are not Politically Exposed People (PEP) or blacklisted individuals.
Youverify has a dashboard for properer case management, where business compliance officers where can view verification statuses, pending applications, document resubmissions, etc.
Step 4. Uploading Business Documents
Businesses upload legal documents that confirm their claims for verification. These documents include all the necessary KYB documents that ascertain the business's legal existence.
Examples of documents include:
- Certificate of Incorporation
- Articles of Incorporation and Association
- Copy of State Business Registry
- Copy of Shareholder registry
- Copy of Director registry, etc.
These documents' submissions depend on the type of business and the jurisdiction of the business.
Step 5. Getting a Business Report
The business report is downloaded by the applicant after verification is completed by the KYB solutions company.
What are KYB Documents for Business Verification Purposes?
KYB are documents that are used by KYB solutions companies for authentication purposes. KYB procedures could include using the following documents:
- Government registries
- Public databases and sources
- Ultimate Beneficial Owners (UBOs)
- Company Registration Number (CRO)
- Copies of articles of association
- Certificate of incorporation
- Bank account identification document (RIB and BAN)
- National Identity card or passport of each UBO
- Tax invoices
The KYB documents required for verification may be different from country to country. The essence of the verification is to establish trust and security in dealing with new business relationships.
What Are The Businesses Affected by KYB?
Anti-Money Laundering (AML) puts significant awareness on the importance of Know Your Business (KYB). Thus, any potential businesses are required to carry out KYB checks to o establish their authenticity.
All businesses that deal in financial or payment transactions are mandated by AML and eIDAS regulations to carry out KYB processes. Businesses have to perform verify other businesses before establishing a relationship.
KYB compliance is required for business in the following industries: :
- Institutions that deal with credits
- Institutions that deal with finances
- Cryptocurrency marketplaces
- Estate Agents
- External Accountants
- Institutions that offer gambling services
- Online banking
- Online payment services
- Tax Advisors
- Trusts, etc.
Frequently Asked Questions (FAQs)
What are KYB checks?
KYB checks are steps taken by a business to check out or verify the authentication of other businesses before dealing with them. The initial inspections when starting a new business-to-business relationship are crucial. The assessment should continue as the b2b relationship evolves.
What are KYB Documents?
Know Your Business (KYB) documents are legal papers required by businesses to justify their claims. These KYB documents assure that businesses are dealing with a secure and established business partner.
What is KYB Verification or Business Verification?
KYB or Business verification is the process of checking the information provided by a business entity. The KYB or Business verification can be done by FinTech companies or KYB solution companies.
KYB solution companies help businesses to verify the identity of another business in a B2B environment.
What is eKYB?
eKYB simply means electronic or automated Know Your Business. It is the digitalization of KYB processes. KYB helps to quicken the operation of B2B and helps them to close business deals on time.
Businesses use eKYB today instead of the traditional KYB. eKYB helps businesses to reduce the costs of doing business.
What is KYB in Banking?
Banks are financial institutions that deal with businesses and individuals. Banks use both KYC and KYB processes to secure the security of their businesses.
The banks have to be KYB compliant in order not to allow criminals and corrupt political leaders to use their platforms for fraudulent activities.
Achieving Know Your Business (KYB) with Youverify
KYB is an effective strategy a business can undertake to prevent being exploited by criminal activities. It uncovers money laundering and the use of shell companies to perpetrate fraud.
Youverify global KYB solution gives detailed report business profiles, acquires, and screens UBO for proper risk assessment. Since the verification of business information should be ongoing, Youverify gives you key insights into your verifications with dashboards and reports.