Know Your Business (KYB)

🔹 Definition

Know Your Business (KYB) is the process of verifying the identity, ownership structure, and legitimacy of a business entity before establishing a relationship or providing services. KYB is an extension of Know Your Customer (KYC) and is a key requirement in Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) compliance frameworks, particularly for banks, payment processors, fintech platforms, corporate service providers (CSPs), and other regulated entities.

The purpose of KYB is to prevent the misuse of corporate structures for financial crimes such as money laundering, fraud, tax evasion, and terrorist financing.

🔹 Frequently Asked Questions (FAQs)

Q1: What information is collected during KYB verification?

• Company registration documents (e.g., Articles of Incorporation, Business Profile)
• Ultimate Beneficial Owner (UBO) information and shareholding structure
• Registered business address
• Nature of business and industry risk profile
• Directors and authorized signatories
• Licenses or regulatory status, if applicable
• Adverse media and sanctions checks on the company and key individuals

Q2: How is KYB different from KYC?

• KYC focuses on verifying the identity of individuals (e.g., customers, account holders)
• KYB focuses on verifying legal entities (e.g., companies, partnerships, trusts)
• KYB often requires a multi-layered review of corporate structures and beneficial ownership, which may span across jurisdictions

Q3: When is KYB required?

• When onboarding a corporate client or merchant
• Before forming a business partnership or vendor relationship
• When conducting B2B payments, especially cross-border
• As part of ongoing due diligence for existing business accounts
• When a company is involved in regulated sectors such as crypto, finance, real estate, or gambling

Q4: What are the risks of poor KYB procedures?

• Onboarding front companies, shell entities, or sanctioned businesses
• Exposure to hidden UBOs involved in criminal or terrorist activities
• Regulatory penalties for non-compliance with AML/CFT laws
• Reputational damage due to enabling illicit business transactions
• Increased risk of fraud, chargebacks, or payment abuse

Q5: How can KYB be automated and strengthened?

Implementation of ongoing monitoring to detect changes in business status or structure

Use of corporate registry APIs (e.g., Singapore ACRA’s BizFile, UK Companies House)

Adverse media and sanctions screening of corporate entities and executives

UBO discovery tools to map ownership chains

Risk scoring models tailored to business type, country, and complexity