Know your customer, also known as KYC, checks first came into force to stop the profits from crime. Regulated businesses were required to maintain a system of verifiable information about each customer’s identity and to ensure that customers were exactly who they claimed to be.
Businesses on the other hand did not have to go through such checks. This is where Know Your Business came in. Businesses could conceal criminal identities behind corporate identities to hide money laundering. But how does it work and what is it all about?
What does it mean?
The Know Your Business, or KYB, process shares a lot of features with the KYC process. The difference is in the user to identify. The standard process identifies users or potential clients to register them in a company. KYB process is the one in which the person responsible or legal representative of a business is identified.
Most business companies need to carry out due diligence to identify the businesses they work with and fight money and other tax crimes. Additionally, they work with organizations with security and guarantees. These are legal requirements.
What are KYB Procedures?
These procedures are developed specifically to comply with various regulations against anti-money laundering and counter-terrorist financing. The KYB procedures require information and documents from reliable sources. The pieces of information the company requires include the company’s business register and the identities of the Ultimate Beneficial Ownership and shareholders owning more than 25% of the company.
The ultimate goal of the processes is to identify and evaluate any suspicious activity. It protects the companies from accidentally being used for money laundering or terrorist activities and helps avoid unwanted fraud.
When you are verifying a business owners’ identity, structure, and beneficial owners by traditional methods it can be quite time-consuming. That is why most companies that want to comply with the policies tend to use electronic identity verification to automate the process and make it all so much quicker and more efficient.
State analyses, global corporate records, PEP, and Sanctions database data are utilized to analyze final beneficiaries. On top of this, continuous monitoring and automatic controls ensure that the business maintains compatibility at all times. This allows the KYB service to collect important information about the business consistently
Who needs it?
All financial institutions that make money transfers such as banks must verify KYB. Companies must analyze and verify the business and financial information of their partners from all around the globe. Through this, companies protect themselves from document fraud and can guarantee the security of transactions.
To comply with laundering regulations, KYB procedures must be fully completed. Institutions that comply with these regulations protect themselves from fines and a loss of reputation.
Know Your Business
KYB and KYC guidelines are carried out to protect businesses and customers from fraudulent criminal activity. Activities such as tax avoidance, money laundering, and document fraud can cause serious monetary and reputational damage to a company and so using these checks can prevent it.
Financial fraud continues to grow each day in the world. Banks must monitor their clients. These compliances strive to make all financial interactions safe and hopefully prevent the rate of financial crimes.