Role of Business Verification in International Payment Gateways

Transmitting money between places is a daunting task. There are numerous financial regulatory authorities, and failure to comply with legislation can result in severe fines, penalties, punishments, imprisonment, and permanent exclusion from the business community. However, financial crime is a perennial menace. It continues to increase with the widespread availability of digital financial products and services. Penalties for financial crimes such as money laundering, corruption, and sanctions increased to USD 4.67 billion in 2020, up from USD 3.75 billion in 2019. 

One of the most important aspects of preventing financial crime, such as money laundering, terrorist financing, bribery, and so on, is to conduct business verification and confirm the identity and source of money. They are essential for every business that wants to build a secure payment environment for the finance and payments industry. Instilling the KYB process is critical for financial institutions since it ensures they are free of illicit activity. However, because anti-money laundering legislation differs in stringency, businesses may find it difficult to transact with other countries. Given these facts, understanding the KYB business verification services is essential since it will boost your understanding of what to expect when registering with a payment service provider or payment gateway.

What is Business Verification? 

Businesses that provide services to other companies rather than consumers must be more attentive in their onboarding processes. Business verification assists companies in verifying the firm with which they desire to work. It entails validating the company’s existence, location, personnel involved with the company, financial health, and so on. 

KYB, or business verification, is the due diligence evaluation of organizations for money laundering, terrorist funding, and other financial crimes. It assists firms in developing policies, assessing suspicious activity, and taking preventive steps. It verifies that the company businesses are dealing with is authentic and not a sham. 

Business Verification in Payment Gateway

A payment gateway facilitates online payments by validating and securely transmitting information about cardholders among the parties involved in the transaction flow. Since B2B transactions are frequently conducted online, the payer and payee may be in separate countries, and illicit activity and scams may be hard to detect. The money transmitted may have come from unlawful sources and pose a risk to both businesses, which is why financial regulators have made it mandatory to authenticate the source of income, verify the business, and follow payment regulations. 

Why is Identity Verification Automation in Payments Important?

Automated payment sector ID verification aims at balancing threats and revenues, i.e., adhering to AML-KYC standards without negatively impacting the bottom line. Payment automation has revitalized the mass-merchant onboarding process, and automation techniques are rapidly expanding to provide improved customer service to onboarding retailers per diem.

To avoid financial penalties and reputational damage, businesses should use automated identity verification in payments, which is critical for preventing fraudulent activities with merchants with wicked motives. 

In accordance with FATF and similar regulations, every financial and government sector, including payments, must conduct KYB and UBO checks before conducting B2B transactions under anti-money laundering and counter-terrorism regulations.

Businesses execute billion-dollar operations every day, both within and outside of the country. A payment gateway solution speeds up and simplifies transactions, but it also introduces new risks, such as financial terrorism, digital fraud, and money laundering. 

Nonetheless, KYB assists payment platforms in developing closer ties with its clients. Platforms may ensure that their consumers are legitimate and trustworthy by checking the businesses that utilize their services. In turn, this can assist in limiting the occurrence of fraud and refunds, which can be expensive for both the platform and the companies who utilize it.

Payment Gateway Identity Verification Checks  

Recent advancements in payment sector identification verification automation with initial screening and compliance solutions have improved the accuracy and security of the retailer screening and onboarding process. Aside from checking business history and transaction quantities, certain preliminary screening checks, such as validating operational nations, marketing channels, and product sections, are key pre-screening checks that machine learning algorithms can easily accomplish. To ensure the firm is what it claims to be, merchant identities are checked against a validated government or private KYB database for sanction lists, PEPs, and adverse media listings.

Role of Business Verification Documents in Payment Gateway

The KYB process, which is required for e-payment compliance, requires the usage of a variety of business verification documents. These documents assist payment platforms in verifying and authenticating the businesses that use their platforms. It includes their nature, transaction purpose, source of revenue, and financial history.

Automation of Risk in Payment Processing

The KYB onboarding and retailer screening processes can never be completely automated. Payment processing always includes some amount of human AML verification procedures. However, risk managers can rely on a set of automation technologies to achieve the highest level of accuracy when establishing retail risk profiles.

Fortunately, payment industry ID verification automation has been enormously successful in retailer identity verification and KYB retailer onboarding operations. The key AML-KYC measures that can be implemented with high automation are KYB, PEP screening, sanctions list, adverse media screening, and UBO checks.

Future of Payment Gateway with KYB

The use of digital payment networks has risen in recent years, making it the dominant way of money transactions worldwide. As a result, businesses must guarantee that their payment gateways remain safe, compliant, and reliable. One such technique is implementing KYB, a critical part of payment industry regulations.

With this in mind, it is unambiguous that each payment service provider must have a strong, dependable, and fast KYB procedure in place. Nonetheless, it is a complicated and time-consuming task.

At The KYB, we offer outstanding KYB services to payment service providers. We understand the complexities and challenges of KYB in payment platforms and are here to help you navigate the process. You are not alone in navigating the KYB maze.

Driving Growth and Security in 2023 with KYB Verification Services

We live in a fast-paced world where threats continue to evolve at lightning speed and grow faster than ever. With the advancement of technology, criminals and bad actors have also been able to modernize their methods. As the world becomes increasingly interconnected, businesses in 2023 face numerous challenges. By using Know Your Business (KYB) services, businesses can achieve both growth and security objectives. Through real-world examples, relevant facts, and figures, we will explore how KYB verification services can positively impact business growth and security.

What is KYB?

Have you ever wondered what KYB is and if it is similar to KYC? KYB Know Your Business and KYC are closely related procedures. Their primary objective is to follow AML regulations, prevent money laundering, and ensure safe financial transactions. Companies deal with different types of customers depending on their business model. KYB refers to the process of doing due diligence on businesses. It is required by AML regulations to verify the identity and authenticity of any potential business customers. Taking this step helps prevent money laundering or terrorist funding.

Risk Management Integrated with KYB Verification Services

As part of the traditional “Know Your Customer” (KYC) process, KYB services help businesses better understand their customers. A thorough evaluation, verification, and monitoring of business partners, suppliers, and clients ensure compliance and identifies risks. Businesses are protected against fraud, money laundering, and other illegal activities by KYB’s holistic approach to risk management.

For example, multinational corporations enter foreign markets using KYB compliance procedures to validate a prospective supplier’s legitimacy and financial stability. It prevents the company from engaging with fraudulent entities by preventing its supply chain from being disrupted and its reputation damaged.

Compliance and Regulatory Advantages

Non-compliance with regulatory requirements will earn severe penalties and damage businesses’ reputation. Keeping businesses up-to-date with local and international regulations is the heart of KYB’s business verification services. KYB verification services can help a financial institution confidently welcome new business clients. AML and CFT regulations are enhanced by verifying the legitimacy of potential corporate customers, reducing the risk of legal repercussions. It’s no surprise that KYB verification has become one of the most challenging aspects of AML compliance efforts, as revealed by Thomson Reuters’ 2022 Cost of Compliance Report.

Faster Transactions and Simplified Onboarding

An onboarding process can be resource-intensive and time-consuming. With KYB services, establishing new business relationships is significantly streamlined, onboarding is easier than ever, and transactions are made simple. An example of this would be a technology start-up launching a product with a new business partner. Using KYB verification services, both companies verify each other’s legitimacy, facilitating seamless collaboration and expediting the product’s go-to-market. According to a report by McKinsey & Company on digital identity verification, the KYB process can reduce onboarding time by up to 80%.

Making Data-Driven Decisions

By leveraging KYB verification services, businesses have access to reliable and timely information about potential partners, enabling them to make informed decisions. Suppose that an online retailer is considering partnering with a third-party logistics service provider. Using KYB services, the platform helps users make informed decisions by analyzing the provider’s financial health, customer satisfaction ratings, and past performance. The Experian study found that 93% of businesses saw a positive impact on their revenue through best practices for data management, including KYB verification.

Building Customer Trust and Reputation

Businesses build customer trust and enhance their market reputation by investing in security and KYB compliance. The most common example is a digital payment platform that implements KYB verification procedures for its users to interact with. It boosts customer loyalty and confidence by providing a high level of security. In PwC’s 2021 World Consumer Insights Survey, 89% of respondents indicated they trusted companies that prioritized the privacy and security of their data.

Fraud Prevention and Risk Mitigation

KYB services protect businesses against fraud and reputational damage, protecting them against financial loss. Know your business services are used to verify the authenticity of venture capital firms before an investment firm considers partnering with them. In this way, the investment firm will avoid becoming victims of a potential scam, safeguarding client funds and investments. ACFE’s 2022 Global Fraud Study revealed that companies lose approximately 5% of their revenue each year because of fraud, which highlights the importance of KYB verification practices.

Facilitating Business Expansion

Through KYB verification services, businesses can expand internationally and gain knowledge of local markets and foreign partners. An example would be when a software company wants to expand into a new region and is looking for a local distributor. A KYB service will then help companies to evaluate potential distributors’ reputations, financial stability, and compliance with local laws, reducing market entry risks. UNCTAD reported that foreign direct investment flows increased by 12% in 2022, indicating companies will continue to seek foreign markets as opportunities.

Enhancing Cybersecurity

KYB verification services protect businesses against cyber threats and data breaches by bolstering cybersecurity measures. As an example, imagine a technology firm collaborating with a cloud service provider to store sensitive customer information. With KYB services, cybersecurity standards are ensured, and the risk of data breaches is reduced. According to IBM’s Cost of a Data Breach Report 2022, data breaches cost, on average, $4.24 million, making KYB verification a worthwhile investment.

Final Thoughts

Integrating Know Your Business (KYB) services is becoming increasingly critical to growth and security in the business landscape of 2023. Businesses can improve customer and partner trust by performing enhanced due diligence, ensuring compliance, streamlining onboarding, and integrating data. By leveraging KYB’s verification services, businesses can expand into new markets, enhance cybersecurity defenses, and gain a competitive advantage. After seeing the multitude of benefits offered by KYB verification that drive growth and security, who could resist them? 

The Ultimate Guide to Know Your Business Services: A Comprehensive Overview

Know your business helps companies understand every aspect of the businesses they work with. KYB prioritises getting to know the company’s owners, shareholders, and suppliers before focusing on the customers. That is why, in the modern age, it is considered an integral part of compliance assurance across various industries, not just regulated ones. 

Approximately 19% of all online purchases by B2B merchants are fraud attempts. In Australia, B2B invoice fraud cost $91.4 million in the last financial year, according to the ACCC’s Targeting Scams report. 

Thus, Know Your Business practices are helpful since they assist an organisation in verifying corporate and personal information related to the higher management of the client organisation. By utilising a KYB system, one may be able to detect red flags for the financing of terrorism or money laundering if suspicious activity is detected. In other words, having up-to-date information in one location can assist in identifying and mitigating AML risks and ensuring compliance with all relevant regulations.

Why is KYB Verification Important?

Financial institutions need KYB verification to assess fraudulent activity associated with corporate clients. For a company to be able to do business with another company, KYB compliance is essential. Business owners, shareholders, or money launderers who misappropriate or launder their income should be identified by companies. 

To determine whether they are dealing with legal or shell corporations, KYB applications verify the legitimacy of companies. Corporate clients are more complex to work with by their very nature than individual clients. A more comprehensive research approach is required, and it usually involves a variety of people, which enables the framework for understanding to be broader.

Financial institutions are also required to verify KYB. It should be regarded as a high priority considering the consequences of failing to perform KYB verification processes correctly.

Know Your Business (KYB) vs Know Your Customer (KYC)

It is important to note that Know Your Business and Know Your Customer have many similarities. Their common objective is to comply with AML regulations to ensure the safety of financial transactions and prevent money laundering. Customers or consumers must comply with KYC regulations and procedures if they are named individuals. Furthermore, KYB regulations have been developed to address cases involving corporations or businesses. This KYB regulation will apply to any business-to-business service provider. 

Read More: Unlocking the Power of Know Your Business – Enhancing Trust and Mitigating Risk

How do KYB Checks Help With Compliance?

Before beginning the onboarding process, these checks assist firms in assessing an individual’s or business’ suitability. Also included in KYB checks are persons of significant control, politically exposed persons, and ultimate beneficial owners, all of whom have the potential to be classified as high-risk customers. An organisation may be required to adjust its approach if it decides to work with a client or customer who represents a greater risk. To keep track of any status changes, you may need to perform enhanced due diligence or conduct more comprehensive ongoing monitoring.

What is Required to Verify a Company?

A company’s identity verification is a complex and delicate task. The KYB process must be adapted to each entity based on its unique characteristics. Know Your Business verification procedures generally involve the following:

Document Verification of Company Registration

To determine whether the business is legitimate and active, the KYB reviews the business registration and license. Providing as many details as possible will make it easier to verify the company’s existence.

Verifying the Beneficial Owner (UBO)

Understanding the company’s context requires gaining a deeper understanding of its members. Specifically, the Know Your Client (KYC) process must be utilised to identify the owners. Identifying the nature of the Ultimate Beneficial Owner network and its activities will enable the detection of illegal activity and the possibility of the company serving as a cover.

Investigate Adverse Media Coverage

When researching a company, it is essential to understand how it interacts with the environment thoroughly. For instance, knowing their relationship with suppliers or customers can help measure their risk.

Determination of PEP

The term PEP refers to politically exposed individuals. These individuals hold public positions, making them vulnerable to fraud, corruption, blackmail, and other abuses. Therefore, companies are exposed to greater risks (mainly if they are UBOs). Thus, verifying whether this type of profile is present in a company verification is necessary.

Checking for Blacklists

Data of individuals and businesses involved in illegal activities (or who have carried out illegal activities) is collected on sanctions lists. Checking whether a corporate client is included on these lists requires the analysis of large amounts of information and the cross-referencing of company names, aliases, and the identities of individuals. For KYB verification, however, this information is extremely valuable.

Why does KYB Matter?

Compared to other fraud mitigation techniques, Know Your Business is relatively new. Despite KYC regulations being in place since 2002, there was a loophole: business relationships received different scrutiny than individual relationships.

It was, therefore, possible for criminals to establish shell companies to defraud businesses or, more commonly, to disguise their identities by using legitimate businesses. Since business records were only briefly reviewed, fraudsters can launder money, fraud, fund terrorism, and commit other illegal activities without being personally screened.

As part of its Customer Due Diligence Requirements in 2016, Financial Crimes Enforcement Network (FINCEN) introduced new regulations regarding KYB. The standardised method of verifying the legitimacy of another company allows any business to work with another company.

What are KYB Procedures?

No specific instructions are provided in the CDD Rule regarding how each organisation should conduct KYB checks. The Know Your Business verification process includes the following:

  • Business verification 
  • Identification of the UBOs 
  • Ongoing monitoring of risk and maintenance of updated customer information

AML laws, including the CDD Rule, are complied with due to the KYB process. The following data points must be collected and verified by companies to ensure compliance: 

  • The legal name of the company.
  • The place where the company is located. Business operating addresses may differ from the registered address.
  • A business entity’s registration status indicates its eligibility to conduct business.
  • An entity must complete licensing documentation for legal operation.
  • Verification of a corporation’s UBOs.

Who Needs KYB?

Following the 5th anti-money laundering directive, KYB is required for the following entities subject to AML regulations:

The identities of beneficial owners do not need to be verified for some corporate customers. Among them are:

  • Markets within the European Economic Area (EEA) that are regulated, or those on non-EEA markets that are regulated;
  • It has also been found that KYB verification services are advantageous for sectors that are not regulated, such as e-commerce and car sharing. A verification of this type aids in exposing shell suppliers and their owners.

Automated & Manual KYB

KYB involves a complex process that involves companies collecting, analysing, and managing vast amounts of data about businesses with which they are affiliated. It is typically more time-taking and hard to do this manually since it requires the following:

  • Developing in-house compliance infrastructures;
  • The screening of a multitude of watch lists, sanction lists, and PEP lists is often performed with a guarantee that the desired outcome will be achieved.

An automated workflow ensures compliance and seamless onboarding while verifying companies in real time. It is also important to note that human intervention is possible when tailored solutions are required. A hybrid approach considers the complex nature of certain company structures and the specific nature of certain industries.

Benefits of KYB

A new client or company registration is a time-consuming and costly process, both economically and in terms of personnel. It generally takes many hours to verify a company manually. Even so, it cannot be guaranteed to be error-free. By automating Know Your Business, verification time can be sped up, costs can be reduced, and much of the inefficiency and human error can be eliminated.

Fraud Prevention

As KYB solutions can recognise digital modifications, they reduce the risk of counterfeit document fraud.

Verifications Simplified

Using Know Your Business, the necessary information is extracted automatically from national and international databases. Additionally, it simplifies tracking users and entities due to the reduced work involved.

Optimising Resources

KYC and KYB are becoming increasingly expensive. Having to Know Your Business verification automated allows employees to focus on relevant and important tasks.

Continual Updates

KYB must be performed continuously, not just during the registration process. With this automated solution’s help, you can access databases and create custom reports in real time. A company’s situation continuously changes, and its performance needs to be updated regularly. Controlling all stakeholders in an organisation is complex and requires considerable investigation.


Moreover, KYB can greatly facilitate the activities of banks, as they will have access to precious information regarding their clients due to the KYB. A deep understanding of customers to know which product or service business should be adapting.

Learn More About KYB Industries

KYB Risks

The failure to implement a KYB process can put businesses in risky industries such as fintech and cryptocurrency. It is possible to experience significant financial, reputational, and regulatory risks due to ineffective Know Your Business measures and losses due to fraud and other criminal activities.

It is important to note that the potential for illicit activities is one of the main risks associated with not implementing a KYB process. Businesses may unknowingly facilitate illegal activities if KYB measures are not in place to protect them from being used as a front for criminal activity by criminals. Regulations may sanction the company, fine it, and damage its reputation.

Business entities may also be exposed to financial losses in the event of fraud, other criminal activity, and regulatory risks. If Know Your Business measures are not in place, fraud can be detected by using stolen identities or fabricating fake companies, which cannot be detected by businesses without KYB measures. Customers and the business may suffer financial losses as a result.

Furthermore, failure to implement KYB measures can damage a company’s reputation. Due to the rapid spread of information via the internet and social media today, any negative publicity can quickly spread across these platforms. When a company’s reputation is damaged, it may lose business, lose customer confidence, and be difficult to attract investors.

Lastly, businesses may also be subject to legal action if they fail to implement adequate KYB measures. The business may be held liable for damages if it facilitates money laundering or other criminal activities. Financial losses and legal fees may result as a result of this.

Challenges of Know Your Business

Companies do not wish to be found non-compliant with KYB, as they do not want to be penalised and may even be forced into bankruptcy. Know Your Business is, however, a rigorous and complex process, and there are legitimate obstacles that prevent companies from complying with it. The following are some of the challenges that banks and financial institutions face when it comes to KYB:

Information Silos

One of the main challenges in achieving high-performance in-life monitoring is the existence of silos within financial institutions, where not all information is shared equally among the staff. The division of retail banking and corporate banking may sometimes require a compartmentalized approach. However, siloed approaches often result from existing operating patterns, with Know Your Business and risk management teams being isolated from one another regarding information exchange.

KYB’s Complexity and Unwillingness to Adapt

As a result of the growing digitalisation of financial services and constant regulatory changes across numerous jurisdictions, organisations in the financial services industry have had difficulty managing to Know Your Business. In some circumstances, RegTech has been gradually adopted to automate KYB processes, but its adoption has been slow. Using new technology may be difficult for businesses due to a desire to avoid disrupting service and losing high-value clients. The issue may also be one of trust.

KYB is Time-Consuming

Numerous banks automate KYB verification to comply with Anti-Money Laundering requirements and secure their business clients. Electronic authentication is made simple by several KYB compliance programs. Even with automation, KYB remains time-consuming. This is because banks continuously verify the information of their business clients and continuously monitor their activities without disrupting the services offered to their clients online. Further checks are conducted on the ultimate beneficial owner’s identity and watchlist to confirm that they do not appear on sanctions lists. Client satisfaction and compliance take time, and many banks need help to strike a balance between the two.

Cost of KYB

According to 58% of financial institutions, obtaining data on the Ultimate Beneficial Owner is the greatest challenge. In contrast, banks claim to spend around $70 million (64 million euros) on global customer due diligence and Know Your Business yearly. It is common among financial institutions that excessive contact with customers, inconsistent demands, and security issues are their most significant pet peeves, while they are also concerned about clients not cooperating, conflicting regulatory requests, and penalties for non-compliance.

What are KYB Verification Documents?

Anti-money laundering laws stipulate a set of documents that must be submitted for a particular jurisdiction. Typically, the  KYB checks obtain and verify the following documents on behalf of legal entities: 

  • Incorporation or registration certificate
  • Extracted from a state company registry
  • Incumbency certificate
  • Good standing certificate
  • The incorporation/association/registration memorandum
  • Similarly structured documents

In the Nutshell

KYB automation has historically been a challenging process for a variety of reasons. At different stages of the Know Your Business chain, various providers are required to obtain exhaustive data or perform checks. Bringing these solutions together, maintaining, and orchestrating them comes with several technical challenges, as well as friction in contracting and negotiating with vendors. Furthermore, the specificities of regional regulation and risk profiles add yet another layer of complexity. There are still certain instances in which human intervention is required, such as dealing with a back-and-forth with customers and reviewing unstructured documents.

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