Why Authoritative Data is the Backbone of Effective Business Verification

In a world where one wrong business connection can cost millions, can entities really afford to trust unreliable and incomplete business verification data? 

Every day, businesses face high risks, regulatory fines, and hidden liability fraud due to their information sources falling short. Companies heavily rely on Know Your Business data to verify legal entities and the credibility of potential partners. Moreover, rapid innovations often outpace regulations, leaving businesses unsure of the compliance boundaries.

Therefore, the need for official, updated, and authoritative data for KYB is crucial. Let’s go through the blog and explore what authoritative data is and the role it plays in business verification.

What is Authoritative Data and Why Does It Matter?

Authoritative data in Know Your Business is the information that is sourced directly from official registries and government databases. This helps maintain accurate company records. Authoritative data enables a thorough verification of business partners and associated company directors, UBOs, and shareholders to ensure compliance with AML regulations.

Do you know that an estimated 10–20% of businesses report changes to their People with Significant Control (PSC) each year due to ownership transfers, restructuring, or compliance updates?

Therefore, this is one of the reasons why companies are required to rely only on authoritative data. Additionally, here is why authoritative data matters:

• Ensure adherence to AML and KYB regulations while preventing penalties.
• Reduce business fraud and verify the authenticity of legal entities.
• Ease regulatory audits and flags high-risk profiles.
• Protects supply chains and reduces disruptions from illegal business entities.
• Verifies the complicated UBO hierarchies.

Additionally, in the fight against money laundering and adherence to AML compliance,  having access to authoritative UBO data is important for businesses. It ensures that financial institutions are effectively verifying the true ownership structure. Let’s explore what FATF has to say about UBO verification data.

Financial Action Task Force(FATF) Guidance on Beneficial Ownership of Entities

The FATF has updated its guidance on ownership standards stated in Recommendation 24, on March 10, 2023, to help states prevent corrupt and sanctions evaders from using anonymous shell companies.

Moreover, it will help countries assess and mitigate money laundering and terrorist financing associated with foreign entities. Therefore, the latest and revised version of Recommendation 24 states:

“Countries should adopt a multi-pronged approach to collect beneficial ownership information, ensuring it is adequate, accurate, up-to-date, and accessible to authorities in a timely manner.”

The revised version mandates that beneficial ownership information be held by a public authority or an alternative mechanism ensuring efficient access to the information.

Another crucial factor includes the maintenance of publicly accessible UBO registries. States across the world should maintain UBOs’ public registries to enhance transparency and help prevent illicit activities, including money laundering and tax evasion.

Key Approaches to Accessing KYB Data

Businesses are required to focus on reliable, accurate, and secure data, as regulatory constraints continue to grow. It is important to make informed KYB decisions, meet compliance requirements, and create long-term partnerships.

However, choosing the right kind of KYB data sources is important to ensure accurate and real-time updates to comply accordingly. The following are the two ways businesses can access UBO data:

• The Registry Approach

This approach involves the government or a public registry that is responsible for collecting and storing data on company owners, beneficial owners, directors, and stakeholders.

• The Existing Information Approach

This approach retrieves ownership information from various existing records, such as tax records, bank data, and other databases, to find who owns the business. Despite having all the information at a central location, the data is retrieved from multiple sources.

How about businesses having an all-in-one solution, where they can get information from official registries and ensure proper sanctions and AML compliance?

The KYB’s authoritative data verification is a business’s go-to solution as it provides real-time data fetched from official business registries. Not only this, The KYB screen entities against sanctions, PEPs, Adverse media, Watchlist, and Warning & Regulatory enforcements.  Additionally, it provides complete AML compliance and efficient due diligence by guaranteeing accurate data, reliable sources, thorough coverage, and real-time updates.

The Pitfalls of Using Unverified or Stored Data in Business Verification

Verification of Ultimate beneficial ownership is a crucial step in AML compliance. Otherwise, businesses can face heavy penalties.

Depending solely on stored or business ownership data sources can leave businesses in a vulnerable position, leading to severe damage to business operations. More consequences include:

• Incomplete Insights into Ownership Structure

If the data is not accurate, companies may fail to disclose the real beneficial owners behind their business partners or suppliers. The ambiguity creates blind spots in risk assessments and can conceal connections to illicit activities.

• Supply Chain Due Diligence Issues

Supplier data is often incomplete, outdated, or inaccurate, which makes the risk assessments unreliable. Moreover, different jurisdictions with different standards complicate the global supply chain oversight.

• AML Compliance Challenges

Constant evolution of regulations across jurisdictions creates complexities. Inaccurate or outdated data hinders effective AML screening, leading to difficulties in monitoring complex transactions.

Moreover, it increases the false positive rates, which eventually burdens compliance teams.

• Regulatory Uncertainty

The frequent updates in regulatory guidelines necessitate continuous updates to policies and systems. Scattered or inconsistent data causes a heavy cost of compliance.

Additionally, extensive documentation and reporting requirements demand dedicated resources.

• Miss Flags on Sanctions or Regulatory Warnings

Unverified or stored datasets often lack comprehensive coverage of sanctions lists, watchlists, or regulatory enforcement. The gap increases the risk of businesses unknowingly engaging with sanctioned entities or individuals who are flagged for compliance issues.

The KYB’s Authoritative Data | Helping Businesses with Compliance and Due Diligence of Partners

The KYB is built to assist and empower businesses with authentic and tech-driven business verification information. Relying on authoritative data means making decisions based on facts, recognized and trusted by regulators.

The KYB’s authoritative data provides the most reliable foundation on the following:

• Accurate and Updated Data on UBOs, Company Directors, and Business Partners

By fetching information directly from the official registries in real time across jurisdictions, The KYB verifies and provides detailed insights on a company’s actual and complicated ownership structures.

Not every state provides publicly available data; therefore, The KYB retrieves data from official sources on UBOs and other officials of the company, providing them in a centralized form.

• Uncover Hidden Relationships and Liabilities

By thorough due diligence, businesses can get to know about hidden relationships and liabilities to identify complex connections and potential risks associated with them.

The KYB offers enhanced due diligence to review the legal aspects of businesses, especially when signing a deal with any.

• Screen Against Updated Sanctions List and Regulatory Enforcements

The KYB not only provides updated data on Ultimate beneficial owners directly from the official business registries, but its integrated Sanctions Screening feature also helps assess sanctions-related risks.

Moreover, it also protects companies from heavy regulatory penalties by ensuring robust monitoring against regulatory enforcement and warning lists.

• Reduces False Positive Rate

The KYB is optimal for helping businesses comply with AML and Supply Chain due diligence regulations in line with a risk-based approach. It helps companies to reduce the false positive rate in business verification while streamlining the compliance process. FinTech, RegTech, and Supply Chain industries can maintain higher accuracy with predefined detection rules.

• Supply Chain Compliance Monitoring

The global supply chain companies can utilize The KYB’s efficient due diligence to vet suppliers, partners, and other third parties. Organizations can identify hidden risk or fraud-related activities before they can impact the business.

The bottom line is to trust verified and authoritative data that is fetched from official government sources. To make well-informed decisions and stay compliant with AML and regulatory requirements, companies must not take chances with unreliable business verification data.

Choose The KYB that brings your business closer to accurate, official, and authoritative information.