Banks constantly form relationships with other businesses to grow their services. But the relationship is non-transparent, and banks have no idea about the company they are onboarding. That’s why banks are vulnerable to scammers. They constantly search for loopholes to pass the bar of the bank’s security. To maintain transparency in the relationship with other businesses, banks have a know-your-business (KYB) solution. It protects banks and their customer from financial scams. In the fast-paced growth, businesses can not survive without an effective banking system that protects their dignity and prevent fraud. Building a new relationship is compulsory to fulfill the needs, and KYB solutions provide a transparent way to onboard any company. But most companies overlook the KYB idea; they only verify the customer’s identity and neglect the in-depth verifying procedure for the business.
What is KYB Verification?
Know-your-business (KYB) is the due diligence process before onboarding businesses to confirm the legitimacy of the company and its beneficial owners. KYB is compulsory for all businesses which work in the B2B industry. Business-to-business relationships encompass partnerships, customer relationships, goodwill affiliations, mergers, online merchants, vendors, suppliers, and transportation companies. The significant coverage of B2B shows that companies must meet the KYB and KYC simultaneously. In short, know your business checks are for verifying the company and its owners. It screens all prospects and reaps accurate results, including risk-based assessments. KYB solutions comply with all authorities’ obligations and fraud prevention standards. Most KYB checks include:
- Identifying the company’s real location
- Verifying registered documents
- Background screening of the company
- Verifying the Ultimate Beneficial Owners (UOBs) of a company
- Complying with Anti-Money Laundering (AML)
Remember, these KYB solution procedures depend on the bank’s policies and the state company is working. Sometimes enhanced KYB due diligence is required to onboard high-risk industries, such as the company operating in cryptocurrency, online gaming, real estate, tourism, and fintech.
Relationship between KYB and KYC
Most companies can not differentiate between KYB and KYC. They think it is enough for them to comply with AML regulations if they have done the KYC. But without KYB, businesses can not comply with obligations. They are constantly standing at risk of financial fraud and hefty penalties. In most global jurisdictions, the KYC and KYB are the fundamental parts of security. These processes are the foundation of the AML/CFT regulations. KYC is required in banks and financial institutes to verify individual persons’ identity. It is compulsory to maintain the risk assessment and understand the transaction behavior. These same checks are also essential when the banks and other financial institutes are onboarding the businesses as part of stakeholders, corporate clients, partners, beneficiaries, or similar relationships. This is known as the know your business (KYB) process in this context.
Benefits of KYB in the Banking System
Knowing your business is an obligation for banks and other financial institutes to comply with anti-money laundering (AML) and counter-terrorist financing (CFT) regulations. It is compulsory to mitigate the risk of fraud and enhance customer due diligence (CDD). KYB is designed to comply with AML and CFT regulations to protect banks and financial institutes from money laundering and finance terrorism. The KYB checks are the origin to combat illicit gains and uncover the hidden source of funds. These checks are designed to prevent companies from being used to conduct scammers’ illegal activities. Below are why banks and other businesses should learn “What is KYB.”:
For Compliance
Banks and other financial institutes must meet rigid regulations to combat financial scams. AML and CFT are under the umbrella of all obligations which protect a company from money laundering and terrorism involvement. The KYB solution provider collects various information from the customer before onboarding. They thoroughly examine this information to reap accurate results. This information includes the business registration number, beneficial owner’s name, date of incorporation, tax numbers, and other information related to the customer’s business activities.
For Customer Due Diligence (CDD)
For In-depth knowledge about the business KYB solution service, it is essential to gather additional information. This assists banks in getting more accurate results with more information related to the business and their ultimate beneficial owners (UBOs). This will meticulously check all information about each owner and cross reference that with various watchdog lists such as AML, CFT databases of government, and third-party. This will provide accurate risk associated with all owners according to AML regulation measures.
To Enhanced Customer Trust
Every business relies on the customer’s trust, if their customer does not believe in them, they can not grow in this competitive world. The KYB solution shows the customer that the bank is secure and complies with government policies which enhances the customer’s confidence and develops a trusty environment between the customer and the company. These steps show the transparency of the banking system and also attract customers. It also indicates to banks the suspicious activities of the customer by monitoring real-time transactions.
Final Words on KYB Solutions
Verifying the business before onboarding them is the most convenient technique for banks and other financial institutes. It will protect them from money laundering and financial scams. Digital KYB solutions implement robust technology to verify the business, ensuring banks comply with AML/CFT regulations effectively.
