Know Your Business (KYB) is the procedure whereby businesses typically confirm the identities of their prospective client before doing business with them. Companies typically verify a client’s relevant information, including their personal details and relevant documents. This ensures that the business is not involved in illicit activities. To ensure legal compliance, it is very important to have KYB practices in place. KYB is implemented by all industries, particularly the financial industry and cryptocurrency firms. Even though KYB is considered an extension of KYC, it differs from KYC in that, as it focuses on business owners, suppliers, and shareholders first. Thus, it is important to have proper KYB practices in place in order to know the businesses a company is planning to work with.
KYB Verification Procedures
Verifying a business is an integral part of compliance laws and must be followed to ensure ethical business practices. As per the KYB process, firstly, businesses need to ask for the relevant documentation from clients. This can include their registration, address, and IDs. It is essential to acquire these documents from trustworthy sources and then their truthfulness must be ensured. Secondly, it is also important to perform a UBO verification. UBO means ‘Ultimate Beneficial Owner.’ It refers to the entity that reaps the advantages of the company’s operations. It is critical for companies to know the UBO of their client as it is possible to obtain important information from UBO. Companies can identify the owners, confirm their identities, and then validate that the client is not involved in illegal activities like money laundering. So, UBO identification is a crucial step for business verification. Lastly, it is also vital to consistently monitor the operations of businesses to make sure they are not involved in unauthorized operations. This way, companies can ensure that their business is not the center of financial crime. Hence, it is important to implement KYB practices to protect one’s prestige.
Traditional KYB vs. Digital KYB
Digital KYB, often called eKYB, refers to automated Know Your Business solutions. With the drastic move towards digital platforms, businesses using KYB have also shifted to online platforms for KYB. The traditional KYB process expects potential clients to provide physical identification documents, and it normally takes a lot of time to go through and verify each and every chunk of documentation. This process could take months to complete. Though this process has worked well in the past, it is no longer sufficient with the emergence of new technology and increasing customer onboarding. This is where digital KYB solutions come in.
Automated KYB makes use of digital identity verification whereby prospective clients are required to submit their identification documentation online and AI-based technology automatically confirms their identities from databases. So, authentication through electronic means makes the KYB process more effective and faster. For UBO analysis, digital KYB uses worldwide corporate records, government analyses, and data from databases. Compliance is ensured through automatic and constant monitoring. The data is authenticated through APIs. With the use of the business authorization code, Know Your Business (KYB) online can obtain crucial data for the business.
Traditional KYB can be very time-consuming as the process requires businesses to go through all relevant documents for verification. Thus, with automated business verification services, the process becomes quicker as well as more efficient, and the likelihood of human error is greatly reduced. Additionally, the technique of verifying companies digitally is also designed to be more accurate and trustworthy, and it simplifies the process of authenticating clients. Thus, the digital KYB process can ensure that businesses are complying with government regulations and safeguarding themselves from financial crime.
Due to the existing process being time-consuming and costly, many businesses did not implement KYB procedures. Nevertheless, more businesses are now realizing the importance of verifying businesses with the increasing threats of fraud that come with modern technology. That being said, organizations are also realizing that the process can be automated, which reduces costs and helps save time.
Businesses are frequently faced with the risk of fraud, such as money laundering, or misuse of assets. Thus, it is necessary to have appropriate policies in place for Know Your Business to verify the businesses one works with. This way, businesses can avoid fines and create a safe environment for themselves, clients, and employees. However, this period where competition is increasing calls for the digitization of processes to ensure compliance. Furthermore, the digitalization of the process makes it all the more efficient and helps to save on costs and time. So, digital verification of business is the way to go.