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Navigating The Complexity of Ownership From The Lens of Sanction By Extension

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Lapses in UBO Identification, Sanctions Compliance, and Corporate data

Tuesday, 30th April. 13:00 - 14:00 London Time (GMT+1)

HOST

Mark Bain

Speaker

Louie Vargas

Speaker

Michael Harris

KYB Onboarding

27 September, 2023

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Payment and banking firms conduct Know Your Customer (KYC) verification to avoid becoming the target of criminal networks. The same applies to any entity. Before collaborating with other companies, evaluating the risks they may pose is crucial. This is where KYB onboarding comes to the rescue, mitigating the risk of fraud and helping ensure your business complies with Anti-Money Laundering (AML) and Know your Business (KYB) regulations.

What is KYB?

Know your business is the verification process carried out to check a corporate counterparty’s legitimacy and analyze the risk levels associated with that organization. A comprehensive business onboarding process helps prevent financial crimes like terrorist financing and money laundering. It helps entities maintain regulatory compliance and avoid heavy fines. Understanding the entity’s ownership structure facilitates you in making wise risk-based decisions about which firm is secure to work with. 

What is the Role of KYB in Business Onboarding?

Business verification solutions help financial firms and large companies perform thorough corporate due diligence before collaborating with entities and conducting business deals. KYB uses data science and machine learning to analyze firms’ loan histories, credit histories, and financial health to give detailed information about business partners, revenue growth, and certain risks. Using know your business solutions will help onboard legitimate organizations to drive higher engagements.

KYB Onboarding vs. KYC Onboarding

If the client is an individual, then KYC onboarding is performed. However, if the customer is a business entity, KYB onboarding is conducted to check its legitimacy. It is important to note that both onboarding checks do not follow similar rules.

Fintechs and many growing financial firms may switch from targeting individual clients to corporate customers while they expand. However, the data that needs to be collected to maintain regulatory compliance can be more complicated when performing the KYB process than KYC.

The KYB Onboarding Process

The corporate onboarding process helps to verify the legitimacy of a firm’s financial operations, the source of its capital, AML risks, and organizational framework.

Here’s the data you need to collect and verify when performing an onboarding KYB process:

1. Collect Basic Information

The corporate client onboarding process requires basic details like company name and address for verification purposes. Moreover, you should also gather and authenticate the corporation’s legal identity and official documents, such as articles of incorporation, company registration certificate, and certificate of incorporation.

2. Check Organizational Structure

Obtain the full names, addresses, contact details, and IRD numbers of the potential customer’s point of contact and gather the same details about the CEO of the business, the other C suite, and Ultimate Beneficial Owners (UBOs). This can be conducted through validating government-issued identity documents such as driver’s licenses and passports.

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3. Gather Banking Information

Collect data about the firm’s source of wealth, including bank statements, financial statements, and tax returns. Monitor the customer’s transactions to check for unusual activity, such as large transactions or transactions with high-risk entities.

4. Conduct Risk Assessment

Perform a comprehensive risk assessment, focusing on the risk of business operations in the country your potential business partner operates in. Conduct Enhanced Due Diligence (EDD) checks in case of high-risk jurisdictions or potential high-risk customers.

5. Ensure AML Compliance

When performing corporate banking onboarding, ensuring AML compliance is crucial. This can be done by performing Customer Due Diligence (CDD), ongoing monitoring, suspicious transactions reporting, and record-keeping.

How to Perform an Effective KYB Onboarding?

Screening every transaction and firm is not feasible. You need a seamless corporate onboarding process that functions quickly and automatically without compromising your business operations.

1. Build an in-house KYB Onboarding Team

KYB onboarding is a challenging process as it deals with volumes of business data. Doing it manually requires a huge team of analysts, compliance officers, and IT experts. The team will create watchlists for every screening category, collect data,  and prepare forms. After that, they manually verify every business partner, which is time-consuming. 

2. Outsource to a Business Onboarding Service Provider

Doing KYB verification manually can take much of the team’s time to verify an organisation and finish onboarding. It may negatively impact your partnership and the organization’s overall outcome. Rather than building a team, outsourcing is a better option, saving your team’s time for demanding and urgent tasks.

3. Subscription-based KYB Verification Solution

Apart from outsourcing, another option is to employ a KYB onboarding solution available online. You can still have a compliance officer to work with the business in collecting documentation for obtaining the basic data. The KYB onboarding process can be conducted in the application with different checklists, screeners, and customization options. The complete KYB onboarding process will be performed seamlessly in no time. You only have to pay subscription charges monthly or annually, and the rest is onto the solution to get the onboarding done for you.

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