🔹 Definition
Know Your Vendor (KYV) is the process of identifying, verifying, and assessing the risk profile of vendors or service providers a company engages with—especially those with access to sensitive data, core operations, or regulated activities. KYV is a critical component of third-party due diligence and helps organizations mitigate risks related to data breaches, fraud, regulatory non-compliance, and supply chain disruptions.
KYV is often implemented alongside KYS (Know Your Supplier) and TPRM (Third-Party Risk Management) practices, especially in regulated industries such as finance, healthcare, and tech.
🔹 Frequently Asked Questions (FAQs)
Q1: What does KYV typically include?
- Business identity verification (e.g., registration, tax ID, legal name)
- Ultimate Beneficial Ownership (UBO) disclosure
- Sanctions and watchlist screening
- Assessment of cybersecurity and data handling practices
- Review of certifications (e.g., ISO 27001, SOC 2)
- Financial stability checks
- Contractual compliance clauses, including anti-bribery and confidentiality
Q2: Why is KYV important?
- Reduces risk of operational failures or vendor lock-in
- Ensures vendors comply with relevant regulations and standards
- Prevents relationships with vendors involved in fraud, corruption, or sanctioned activities
- Helps protect sensitive systems and customer data
- Supports compliance with laws such as GDPR, HIPAA, and AML/CFT frameworks
Q3: How is KYV different from KYB or KYS?
- KYV focuses on service providers or technology vendors that support internal or external operations
- KYB targets business clients or partners in a commercial relationship
- KYS (Supplier) targets product-based suppliers in a procurement or manufacturing supply chain
Each plays a unique role in managing counterparty risk.
Q4: What are examples of high-risk vendors?
- Vendors located in high-risk jurisdictions
- Cloud service providers with access to customer or financial data
- Vendors handling payments, communications, or regulatory compliance tools
- Vendors with poor track records or lack of certifications
- Third parties with access to customer PII or proprietary IP
Q5: How can KYV be implemented effectively?
- Use a centralized vendor onboarding workflow with automated verification tools
- Require standard due diligence documentation before contract signing
- Perform risk scoring based on service type, access level, and jurisdiction
- Schedule periodic reassessments, especially for critical vendors
- Maintain an auditable record of KYV assessments and decisions
