Identifying the legitimacy of businesses and merchants is not just a routine procedure – it’s an essential protective measure for banks and financial institutions. But how can you verify if a business is legitimate? Fenergo delves into the concept of KYB.
Ensuring the integrity of the entities we engage with is crucial for money laundering prevention, fraud prevention, and financial crime prevention. This necessity has given rise to a rigorous practice known as Know Your Business (KYB).
KYB is a multi-layered process that verifies the identity of business entities before forming any professional relationships. Unlike the well-known KYC (Know Your Customer) which primarily focuses on individuals, KYB dives deeper by examining both the businesses and any Ultimate Beneficial Owners (UBOs).
In the current business climate, which is so heavily reliant on digitalisation and technology, knowing who you’re working with/alongside is more paramount than ever – amidst a hive of digital deception.
The concept of KYB asserts that you must gather the following data around who you’re dealing with, if you wish to verify who they truly are, fostering a a foundation of trust, and building compliance.
The information that needs to be gathered to verify a business is documents and details ranging from:
- Basic business identification information
- Compliance and licensing information
- Details of Ultimate Beneficial Owners (UBOs)
- Insights into the company’s relationships and context
- Sanction and blacklist evaluations
Meticulously evaluating this data offers your organisation the best chance of preventing fraud, and financial crime. In fact, the introduction of these KYB solutions is more paramount than ever.
According to DBT & Partners, overall growth of fraud-related crimes grew by 25% in 2022 in comparison to 2021, amounting to 4.5 million crimes in the last year alone.
This data clearly suggests that ignoring KYB protocols is no longer an option, especially at a time when fraud and deception are rampant.
Ultimately, firms must begin analysing the local AML laws and legislature, allowing them outline the specific KYB checks required by your jurisdiction to ensure full compliance.
But that isn’t enough, diligent comparison of the business names against AML watchlists must also take place. Be sure to pay extra attention to the shareholders who have over a 25% stake in the organisation you’re dealing with. Implementing technology which can track the latest changes could also be a game-changing move for businesses attempting to avoid being faced with issues relating to fraud.
KYB verification can be achieved in numerous ways, partnerships with organisation’s such as Fenergo could offer the solution.Fenergo offers a tailored approach to KYB compliance that’s beyond the traditional framework. The KYB solution goes beyond compliance with a future-focused, risk-based approach. Continuous monitoring lets it concentrate on higher-risk clients, setting it apart from traditional methods.
By embracing automation and straight-through processing, manual tasks and human errors are minimised. This results in greater efficiency and a new standard for operational efficacy.
Read the full report from Fenergo here.
Copyright © 2023 RegTech Analyst
Copyright © 2018 RegTech Analyst