No wonder businesses are in the modern digital era since they don’t know which hand to shake and which one to avoid. Before forming any sort of partnership with other businesses, it is important to ensure it is worth the time and effort with the KYB checks. This not only authenticates and validates that the company is legitimate but also ensures safety, adherence to compliance, avoidance of guilty penalties, and security of reputation. Conducting accurate KYB checks is challenging, but with the right provider, ensuring compliant KYB verification checks is easier than ever. Here, the experts at The KYB use the seven-step kYB check strategy to ensure business verification. Our KYB verification checks are made simple, and easy, as businesses are verified in real-time and within budget.
In this article, learn more about KYB checks, their importance, the necessary documents needed for verification, and how to verify the business within your dedicated time and budget.
What are KYB Checks?
KYB checks are mandatory for any financial institution or business under regulatory compliance. KYB checks help verify the business identity and additional information, like their association with any financial crimes or link to fraud. These KYB checks involve verifying the identity of non-individual customers such as companies, associations, or trusts.
Importance of KYB Checks
KYB checks are essential in business verification to mitigate risks associated with money laundering, terrorist financing, proliferation, and other financial crimes. KYB checks allow businesses to check the identity of the company you’re engaged to or will partner up in the future. It verifies that the company exists and that you are not inadvertently doing business with entities or have ties to a terrorist organization and are involved with criminal activity. It also verifies the former history of fraud or other financial crimes.
Information Needed for KYB Verification Checks
The KYB process involves collecting and analyzing business data to verify businesses’ owners and financial activities. It Includes:
Business Registry Information
The primary information for KYB verification checks includes collecting data about the business, including its structure, location, nature of business, shareholders or directors, business license, and other relevant information.
Article of Association
Article of association is an important part of KYB checks, which collect and analyze business operation’s incorporated rules or regulations, purpose, ownership records, and structure.
ID Documents of Associates
Another essential document is collecting and analyzing identity documents of anyone associated with the business. These include the identity-related documents and other records of owners, associates, partners, directors, ultimate beneficial owners, and anyone directly or indirectly associated with the business. These documents may only be government-issued documents like national identity cards, passports, driver’s licenses, registry of birth, travel documents, and birth or adoption documents.
Another important KYB check includes checking the financial information and sources of individuals associated with the business and their organization. The financial statement provides insight into the business’s financial health and helps the compliance provider or auditor evaluate the company’s stability and act accordingly.
Contracts and Agreement
Lastly, KYB checks include collecting and analyzing business contracts or agreements with suppliers, other vendors, clients, customers, and partners. It tells the nature of the business, its relation or structure with other firms, and the risk associated with the companies.
Seven Steps to Efficient KYB Verification
With expert assistance and the right KYB solution provider, performing KYB checks is as simple as these seven steps, starting with the basic information collection and ending with continuous monitoring. The detail of each step is elaborated as follow:
The first and most important step is data collection. The KYB process collects basic information about other business entities or individuals. This includes the company’s name, location, registration number, contact details, and additional relevant information needed to verify the company’s existence and is legitimate. This information is obtained from the business’s customers, registration documents, or public corporate registries. These registries include ASIC in Australia, ACRA in Singapore, and Companies House in the UK.
After collecting the necessary documents, scrutiny is performed, and the records are validated. Documents verify that the business you might be partnering up with exists and the provided information is accurate. This is verified via the provided documents; the auditory or the service provider matches the paper with the records and verifies its existence.
Understanding Ownership Structure
Another vital part of Know Your Business checks is understanding the business hierarchy, ownership structure, roles, and responsibilities. It includes identifying and verifying the directors, shareholders, partners, controlling parties, and anyone directly or indirectly involved in the business. This helps companies identify the risk they pose, identify it timely, and mitigate the risk associated with the management or ownership of the business.
Add UBO’s Information
UBOs are anyone who directly or indirectly holds 25% or more business shares. Once the UBOs are identified, the next step is verifying them. This can be done by verifying with databases, auditors, or a KYB compliance service provider. The UBOs can be verified independently against the sanction lists or databases, and businesses can timely identify the risk score a UBO may have.
Once businesses are verified, they are given a low to high-risk score, marked as a red flag. If the company is on a sanction, black, or grey list or has a record of money laundering, fraud, or another type of criminal act, it will automatically be given a high-risk score. The risk score evaluates whether you should form a business relationship with or cut ties with that particular company. Some KYB providers also provide individuals’ risk assessments that inform whether you should onboard that person or not. Since all the process is automated, the high-risk business profiles are automatically rejected or removed. Nonetheless, manual involvement is needed if someone may want to consider working with the red-flagged companies.
Onboard or Eliminate
Once businesses have gone through all five steps, it comes time to decide whether you want to onboard that particular partner, shareholder, director, client, and business or remove it from the options. Even if you remove the company, the data is kept safe and up-to-date in case the loopholes are filled, and you can partner up in the future.
Perform Ongoing Monitoring
Onboarding or eliminating the option doesn’t end things. Businesses need proper monitoring since the data keeps changing, and companies must stay updated. Once the partner, another company, or director, etc., is onboarded comes the ongoing monitoring where they go through the same procedure after weeks or months and verify that they are legitimate. If, during the monitoring, they pose a low-risk score, they go through due diligence; on the contrary, high-risk profiles go through enhanced due diligence.
KYB checks are essential in any compliance program. They help mitigate the risk of terrorist financing, money laundering, or any other illegal activity. KYB checks verify that the company you are dealing with or associated with is legitimate. The KYB seven-step checklist helps businesses onboard businesses or partners confidently, saves time, is available in 225+ countries and states, and has data of our 225+ sanctions and databases that verify instantly while staying compliant and within budget.
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