🔹 Definition
Know Your Supplier (KYS) is the process of vetting, verifying, and continuously monitoring third-party suppliers to ensure they are legitimate, ethical, financially sound, and not involved in illicit activities such as fraud, corruption, sanctions evasion, or forced labor. KYS is a key pillar of third-party risk management (TPRM) and is especially relevant for companies operating in regulated industries, global supply chains, and public procurement.
KYS enhances supply chain transparency, mitigates regulatory and reputational risk, and helps ensure compliance with anti-bribery, AML, human rights, and sanctions regulations.
🔹 Frequently Asked Questions (FAQs)
Q1: What does the KYS process include?
- Company identity and registration verification
- Ultimate Beneficial Owner (UBO) checks
- Sanctions and watchlist screening
- Adverse media monitoring
- Financial health assessment
- Ethical and ESG compliance checks, including human rights and labor practices
- Contractual disclosures and self-declarations (e.g., anti-bribery, conflict of interest)
Q2: How is KYS different from KYB or KYM?
- KYS (Supplier): Focuses on third-party vendors or manufacturers that provide goods or services
- KYB: Focuses broadly on legal entities as customers or partners
- KYM: Applies specifically to merchants transacting on payment or e-commerce platforms
All are part of a risk-based compliance strategy, targeting different counterparty roles.
Q3: Why is KYS important for businesses?
- Prevents engagement with blacklisted or unethical suppliers
- Ensures suppliers meet legal and operational standards
- Helps comply with laws like:
- FCPA (U.S.), UK Bribery Act, EU Supply Chain Due Diligence Directive
- Forced Labour Prevention Acts in U.S., EU, and other jurisdictions
- Mitigates operational disruption, legal liability, and reputational damage
Q4: What are signs of a high-risk supplier?
- Located in high-risk or sanctioned jurisdictions
- Lack of transparency in ownership structure
- History of fraud, bribery, or regulatory breaches
- Negative media exposure related to ethics, labor, or environmental concerns
- Inability or refusal to provide KYS documentation or cooperate with due diligence
Q5: How can KYS be automated and maintained?
- Integrate with supplier onboarding platforms that conduct automated checks
- Use third-party data providers for ongoing monitoring and alerts
- Conduct annual supplier reviews and contract audits
- Leverage workflow automation for approvals, escalations, and re-verification
- Maintain an auditable record of all KYS activities and findings
