Mitigating Business Verification Complexity with The KYB in Mena Region.

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Adequate KYB Verification Service for Seamless Business Onboarding

11 September, 2023

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In this rapidly evolving world, there are various issues for businesses, and conducting business with legal customers is becoming challenging day by day. In this struggling face, the firms must comply with the rigid business verification regulations. These obligations protect businesses from financial scams. However, verifying businesses with traditional techniques is inadequate. It opens various doors for scammers to exploit businesses. In the US, 99% of businesses are small companies, and corporate onboarding is frustrating for small businesses. They need robust Know-Your-Business (KYB) verification services to ensure the prevention of financial scams. Digital sanctions compliance tools are crucial for fintechs and firms that deal in business-to-business (B2B). 

What Makes KYB Verification Essential?

There are various factors behind the increasing demand for KYB verification services. Since the US patriot act bill passed in 2001, the Know Your Customer (KYC) is compulsory for companies to comply with the AML. The regulatory authorities did not urge financial institutions to verify their business and its ultimate owners. In 2016, the Financial Crimes Enforcement Network (FinCEN) observed various loopholes in the business onboarding, damaging the integrity of the global finance ecosystem. The FinCEN and international monetary regulatory authorities designed Know Your Business verification measures to overcome these shortcomings. To comply with these rules is essential for businesses before conducting B2B activities. Being a vital part of the business onboarding process, KYB checks protect financial institutes and secure the integrity of the global financial system. 

Which Industries Need KYB Verification Services?

KYB verification is a legal requirement for most companies, especially financial institutes, gaming, e-commerce, and fintech. These industries are foremost of all others because they are constantly at risk of fraud. The regulation authorities aim to ensure these companies comply with the rigid regulations through KYB checks. These checks are designed to protect the integrity of these companies from various financial criminals. Companies, organizations, and industries who have must comply with KYB regulations are:  

  • Narcotics 
  • Financial Institutions
  • Banks 
  • Medical Insurance 
  • Online Retailers 
  • Asset Managers 
  • Online Gambling/Gaming 
  • Transporters, etc. 

How to Conduct KYB Verification?

Business verification is not as standard as KYC, but it is important for all those businesses who want to protect themselves from financial scams. We know the KYB verification is essential and prevents the company from scams, but the question is, which one is an adequate business attestation process? There are two most commonly used for business verification: Traditional and Digital. Both business verification techniques have their own perks and challenges. 

Traditional Business Verification 

In the traditional technique, companies rely on the human resource to comply with rigid KYB measures. They use conventional methods to verify the identity of the business owners and the legitimacy of a business. The KYB verification steps vary by country and industry, but some standard checks are given below: 

  • Verifying Business Registration 

This process involves requesting the business representatives to submit the required documents and attesting one by one manually. To conduct this KYB check, companies can demand various official records, such as the business’s legal name, ownership structure, and other registration papers.

  • Checking Business legality  

This step is to verify the legal papers of the business, such as the license to operate and their permit to work in the particular industry. The permits can be different depending on the sector they are working like casino, gambling or alcohol, etc. Companies also ensure the businesses’ tax identification number this guarantees that businesses comply with the government’s tax regulations. 

  • Validating Business Owners 

For the entire KYB verification process, companies have to verify the shareholders of a business. It ensures the business’s ultimate beneficiary owners (UBOs) are legal and not involved in illicit activities. Companies send manual data to specific departments to attest information about particular clients. Then, they cross-check records and ensure accuracy. It assists the companies in determining the legal shareholder structure of the business. 

Challenges During Traditional KYB Verification 

  • Incomplete and Inaccurate Results 

Most of the time, businesses provide incomplete information and counterfeit papers, which makes it difficult for the onboarding company to ensure their legitimacy. This can be fake government IDs, business registration licenses, financial statements, or shareholders’ records.  Manual verification can not detect false information and reap incorrect results. It is not easy for human resources to check the security features. 

  • Constantly Evolving Regulations 

Updating obligations and aligning evolving laws with traditional verification is challenging. These latest laws are complex and keep changing with time. Especially, it is a complex and tough task for companies working across borders. Because the requirements of business verification change with the industry and states. The lack of standardization leads to confusion and difficulty in KYB measures. 

  • Time Consuming and Costly 

Traditional verification depends on human resources and manual checks, which are time-consuming and costly. The collection of papers in manual KYB checks, such as company permits, accounting records, and legal agreements, is a common component. Particularly for businesses with large datasets to analyse, this manual process can be laborious. In traditional verification, companies have to recruit employees with experience in KYB services, legal compliance, and regulatory standards is necessary.

Digital Business Verification 

Companies can remotely verify a business’s identity through a phone or laptop using digital KYB verification services. By assuring precise business verification, this innovation aids organizations in complying with KYB/AML laws. 

  • Business Verification 

Online KYB services provide companies with the benefit of remotely collecting all essential documents. The various paperwork, including its business registration certificate, licenses, permits, and tax identification documents, can be submitted in digital form. They can upload these materials in PDFs or images to the KYB verification services software.

  • Business Legality 

KYB verification services system examines the uploaded documents for security features, watermarks, and other evidence of tampering or forgery in order to confirm their validity by utilizing robust technology. Optical character recognition (OCR) technology extracts and validates the data by machine learning. 

  • Owners Verification 

To reap accurate results, digital KYB services validate the identities of essential employees, such as company directors and owners, by cross-referencing their information with databases, public records, or government-issued identification. The company’s ownership structure, especially complicated corporate structures or subsidiaries is verified. Understanding the ultimate beneficial owners (UBOs) is made simpler by this. 

Challenges During Digital Business Verification 

  • Variety of Document 

There are more than 600 documents globally to verify businesses. Every record has its specific feature to protect against fraud, but some documents can be forged easily. Business verification by online attesting their ID cards is not enough. Companies should use adequate KYB verification services for entire business verification by attesting various papers.  

  • Secure Data 

As data breaches are increasing and becoming common, submitting personal information about the business on a particular website is risky. That’s why companies must use KYB verification services, which have secure databases to protect consumers’ prominent information. 

  • Evolving Regulations

AML obligations change with time, and these vary in industries and states. The companies can not comply with different regulations by constant business verification services. They should utilize ultimate KYB verification services, which update and can be customized according to industry needs. 

Final Adequate KYB Verification Service 

Overall, business verification is essential for all companies. However, during traditional verification, they face various challenges that can damage their reputation and lead to hefty fines. On the other hand, it does not matter if you are a small or a giant company. Facing challenges during digital verification is common. To overcome these challenges and convert complex business verification, companies should use third-party KYB verification services. These can accelerate the KYB onboarding process and reap accurate results for the companies.

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