Growth without challenges is a myth and the same goes for businesses. As technology advances rapidly, obstacles to ensuring transparency are also rising. Despite limitless expansion opportunities, companies constantly struggle to keep their financial systems and client onboarding processes as smooth as possible.
As per a report released by the Association of Certified Fraud Examiners (ACFE), businesses in the US lose 5% of their revenue annually due to fraud, therefore, according to standard Know Your Business (KYB), corporate onboarding is the need of the hour. Verification of corporation legitimacy, ownership structure, and screening through adverse media watchlists before establishing strong business relationships can save companies from huge losses. This article discusses the significance of corporate screening and shares a step-by-step process to walk you through the corporate onboarding process.
Corporate Client Onboarding: An Overview
According to conventional business onboarding methods, companies used to register them after face-to-face sessions and by hand signature of documents. However, this is not the only client onboarding method at present. As everything goes digital, the corporate client onboarding process has evolved with technology and time.
Nevertheless, corporate onboarding in businesses and financial institutions is a critical procedure as it’s an in-depth process requiring several stages of KYB verification. However, business verification service providers help companies with seamless KYB onboarding via advanced technological approaches. These advanced solutions allow businesses to onboard their corporate clients efficiently while meeting standard regulations.
Regulatory Landscape of Corporate Screening
Numerous international regulations now necessitate financial institutions and shell companies to ensure compliance with the KYB onboarding system. Multiple Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) measures, for instance, the USA PATRIOT Act and the EU’s 4th AMLD (Anti-Money Laundering Directive), clearly require strong KYB verification processes during customer onboarding. Companies often fail to comply with legal requirements and face severe consequences, such as penalties, cancellation of business licenses, and even detention of involved authorities.
Nevertheless, the regulatory environment for KYB onboarding must be more consistent and uniform. At present, the corporate onboarding regulations may differ in various regions of the world, with their own set of regulations and complexities. However, this difference makes it imperative for companies to modify their corporate screening regulations as per regulatory and compliance requirements for the specific region. In fact, this is crucial for all multinational businesses, and companies tend to expand their roots globally.
Significance of Corporate Onboarding with KYB Standards
Businesses and financial institutions need to carry out corporate onboarding with KYB standards in order to evaluate the risk of fraudulent activities associated with corporate clients. KYB compliance holds crucial importance when it comes to maintaining strong corporate connections between one or two companies. The process helps companies verify business owners, beneficiaries, or hidden entities involved in financial manipulations and crimes like money laundering.
Know Your Business (KYB) standards allow companies to confirm the legitimacy of businesses while evaluating their collaboration with legal entities and shell corporations. Since corporate clients are complicated in their nature of working compared to individual clients, thorough research is required to understand their corporate framework. Hence, financial institutions must prioritize KYB verification to bypass the consequences of inaccurate processes.
5 Primary Steps to Corporate Verification
Corporate onboarding is a complex task and hence requires a regulated verification approach. Standard Know Your Business (KYB) regulations, in this regard, help businesses conduct detailed checks of business owners and corporate frameworks to ensure transparent corporate verification. Following are the primary KYB steps companies must follow during business onboarding processes:
Verifying Documents during Company Registration
The first step of corporate client onboarding is the examination of business licenses and other important documents. The in-depth evaluation of documents ensures the legitimacy and authenticity of organizations. Additionally, it also provides maximum details regarding ownership structure and organizational framework, along with beneficiary details, to smoothly verify the company’s presence.
Confirming Ultimate Beneficial Owners (UBOs)
A more profound understanding of members is necessary to understand a company’s framework and context. Institutions must utilize the Know Your Customer (KYC) procedure to authenticate a company’s owner. Nevertheless, the identification of UBOs and their activities allows companies to detect illicit financial activities.
Investigating Watchlists & Adverse Media Coverage
During corporate onboarding, researching a company’s activities is essential to verify its credibility. It helps businesses to investigate who their corporate clients interact with, what they are famous for, and if there are any illegal activities in discussion on media platforms. Moreover, their interaction with clients and partners helps analyze the risk associated with these business clients.
Determining Politically Exposed Persons (PEPs)
Politically Exposed Persons (PEPs) are individuals holding prominent positions in the public sector, which makes them exposed to the risk of corruption, fraud, and other mishandling. Therefore, businesses and financial institutions connecting with these individuals are also at greater risk. Determination of PEPs allows companies to identify the threatening members of the respective company and eventually make practical decisions regarding corporate client onboarding.
Investigating Sanction Lists
Individuals and companies involved in illegal financial activities are added to the sanction lists (also known as blacklists) by international regulatory authorities such as the Financial Action Task Force (FATF). Therefore, businesses must verify those sanction lists during customer onboarding. Businesses can analyze a large number of lists to identify company names and their members in KYB verification before official business onboarding.
Remarkable Benefits of Corporate Verification
Registration of businesses via KYB onboarding procedures comes with multiple benefits. However, some primary benefits are as follows:
- Reliable Sources for Data Verification: Companies must ensure that the information they utilize for KYB verification maintains compliance and is sourced from trustworthy resources.
- Optimized & Automated Processes: Corporate onboarding via automated KYB methods allows companies to ensure an efficient registration process. Companies can conveniently utilize digital automation tools to optimize the verification process.
- Periodic Updates: Since companies constantly evolve, efficient KYB onboarding allows businesses to stay updated regarding corporate client activities while understanding their legal status.
How The KYB Can Help
Corporate onboarding with KYB standards allows businesses and financial companies to prevent fraudulent activities. With the increasing regulatory conditions and technological advancements, The KYB introduces thorough corporate screening processes to streamline your business growth. Additionally, our experts obtain accurate company data and conduct thorough due diligence to help businesses build long-lasting business relationships.
Want to learn more about corporate client onboarding? Talk to us today.
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