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KYB and KYC: Exploring the Differences and Similarities

15 August, 2023

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Significant differences exist between Know Your Business (KYB) and the ubiquitous as well as widely accepted Know Your Customer (KYC) process. Unlike KYC, this process is focused on identifying suppliers and companies, which sets it apart from KYC. We aim to explain in this article what KYB is and its relationship to KYC, along with finding the difference between KYB and KYC.

The Origins of KYB vs. KYC

KYC (Know Your Customer) is usually called eKYC (Electronic Know Your Customer). Due to the need for efficiency and productivity, the digitized version was created. Digitalization brought productivity, lower costs, and zero bureaucracy to previously paper-based KYC processes. Until KYB and KYC were digitized, financial fraud was at its peak. 

Exchange regulators found that new customers needed to be properly vetted and that users were opening accounts without engaging in sufficient background checks. A security risk was posed because the system was overloaded, making it vulnerable to money laundering and fraud. Authorities also reported that the companies were unable to handle the “dramatic and unexpected growth” of the business.

The United Nations Office on Drugs and Crime (UNODC) estimated that approximately 2 to 5% of the world’s GDP is laundered each year, exceeding $1 trillion. According to a survey, nearly 70% of organizations that experienced fraud pointed the finger at external parties, whether they acted alone or with internal sources.

What is KYC and KYB Verification?

KYC refers to the identification and verification of customers’ identities by certain companies obligated to comply with the regulations in place. A user is registered as a company’s customer to prevent money laundering, tax fraud, and terrorist financing.

Digital KYC (electronic Know Your Customer) refers to digitalizing the KYC process. All industries have benefited from digitalization in terms of increased productivity, cost reductions, bureaucracy eliminations, and waiting times being reduced from weeks to minutes.

KYB and KYC both follow AML standards. With AML5 or (5AMLD) and eIDAS, KYB/KYC processes are digitalized, which allows businesses and clients to onboard digitally in a timely manner and with total security.

Difference Between KYB and KYC

KYB and KYC processes share many similarities. Financial transactions are made safer by implementing AML regulations, which prevent money laundering activities. The major difference between KYB and KYC is its dealing. 

KYC regulations and processes must be followed whenever a customer or consumer is identified. Regulations relating to KYB have been developed in addition to addressing businesses and corporations as customers. The KYB regulations will be applicable to any company providing B2B services.  

Know Your Business Meaning and Requirements

The KYB business verification services includes every feature we have discussed in defining the KYC process. A Know Your Business process identifies the legal representative or responsible individual for a business, unlike the standard process that identifies potential clients.

Most B2B (Business-to-Business) companies check the background of their clients and work with organizations committed to preventing money laundering and other tax crimes, as well as ensuring that security and guarantees are provided. It is, however, legally required in most instances, as in the financial sectors, banks, etc.

The legal representatives of these businesses are required to identify them and verify their affiliation with the client company, professional service businesses. The companies that work with SMEs and freelancers are required to implement KYB practices as well.

The KYB process is similar to KYC, in that digital KYB services reduce costs, eliminate bureaucracy and facilitate the development of safer and more reliable identification methods than traditional ones.

Know Your Business (KYB) Checks and the B2B Environment

Business Know Your Customer (BKYC) or Know Your Business KYB are relatively recent terms. Since various regulations have been announced in many states worldwide, such solutions have become increasingly popular.

Digitalization and delocalization of processes have caused B2B companies to need Know Your Business procedures in order to sell products and services to them. By reducing administrative procedures costs and times, simplifying previously time-consuming and complex processes, and protecting and ensuring adequate legal support for their B2B clients, they need to develop internal compliance policies pertaining to customer and supplier relationships that are broader in scope.

KYB and KYC Checks: How Do They Work?

KYB and KYC checks are also known as customer due diligence. They help a company verify a client or customer’s identity. For this purpose, the firm needs information about the individual or company and then cross-references it with other reputable sources. If it’s a business being verified or a person, the information needed will certainly differ.

Data for KYB

A KYB character report is required for businesses and organizations that hold a quarter share, as KYB solutions specifically target businesses and organizations. In order to verify company, the following information is required:

Data for KYC

KYC requires banks and financial institutions to prove their identity and address. Banks use these records to assess a customer’s risk level and verify their financial situation. For KYC, the following data is necessary: 

The Final Results

Regulatory businesses utilize KYB and KYC processes that require hard copies of ID documents, such as passports and driving licenses.

Keeping your KYB and KYC up to date is not just a regulatory requirement. You must know what risks your business faces in an ever-changing world of cyber security. Your business could face severe problems if you don’t use the right tools and conduct a risk assessment.

Don’t waste your time and energy on long and energy-consuming research. Invest in The KYB Business Verification services now and avoid the consequences, fines, and untrustworthy partnerships. Ultimately, you deserve to work with the best KYB service provider, and that is exactly what you have found.

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