Friday, October 7, 2022

Know Your Business – Eliminate Risks and Protect Corporate Relationships

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Due to the complicated regulatory environment and greater risk of criminal activities, regulated businesses seeking long-term stability benefit most from business verification. A UNDOC report estimates that money laundering accounts for between two and five percent of worldwide GDP, or close to $2 trillion. Data breaches and  ID theft have both grown significantly in recent years.

Tools for Know Your Business verification and compliance can assist in identifying companies that are engaged in hidden activities and transactions thanks to the development of digital technologies and virtual datasets. International standards for Know Your Business and Anti-Money Laundering are increasingly reflecting the need to secure company transactions and prevent the entry of unlawful financial activities into the industry.

What is KYB Verification?

Know Your Business (KYB) is a measure designed to check a company’s beneficial ownership information in order to confirm its authenticity. Businesses can avoid interacting with shell corporations by following this approach and ensuring that they aren’t being used to illegally conceal the identities of owners.

 

Implementing Know Your Business verification methods is an essential component of regulatory compliance for preventing money laundering and terror financing. Businesses must confirm their corporate partners in accordance with Financial Action Task Force (FATF) requirements and other international laws like the 5th EU AML directives.

How KYB is Different From KYC?

Businesses must not confuse themselves with KYB and KYC, however, both the terms have greater similarities to each other. Know Your Customer is a norm used for verifying customers’ legitimacy in the financial sector and other regulated industries and keeping track of profiles on regular basis.

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However, Know Your Business and KYC both are verification standards. The only differentiating point between these two terms is who they are dealing with. Know Your Customer as it explains itself, is use to verify the legitimacy of an individual. On the other hand, KYB is used to verify business.

Know Your Business Process

As with KYC, Know Your Business (KYB) enables businesses to double-check. Their legitimacy by retrieving data from the official commercial registry. An effective online KYB service can gather verified information for the business using the registration number and jurisdiction code of the business.

Search for Business

A search of business includes information about the business:

  • Trademark registration number
  • Previous name (if applicable)
  • Ultimate Business Owners (UBOs)
  • Registered address
  • Company current status
  • Business Type

The authentication tool also offers a financial breakdown of the business’ operating accounts in order to more thoroughly verify its validity.

Filings of the Business

A corporate filing can also include financial statements and sources. And links to reports that can download, as well as quick business filings. And financial information about a company (such as shareholder lists, annual reports, and register reports).

Business Statements

Business statements can be helpful for organizations to keep them updated with structural adjustments to the management of concerned corporate. Changing business circumstances may also reflect by a change of directors or beneficiary owners, follow-up more information on business matters. 

Company Network

Corporate structure information (subbranches and affiliated companies) provides additional insights into parent companies and subsidiary companies. Additional factors to consider are the country where a company register. Its commercial activities, and how many transactions it conducts.

Why a Business Need KYB Verification (Know Your Business)

Regulation compliance and fraud protection are the two most obvious justifications for KYB verification.

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Regulatory Compliance: In compliance with Anti-Money Laundering laws, KYB can assist AML-regulated businesses in understanding their business partners, including corporate clients, vendors, etc:

 

  • Terror funding and money laundering risks
  • Association with illicit or suspicious activities
  • If penalties or other unfavorable regulatory sanctions implement
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Numerous regulatory organizations, such as the Financial Action Task Force (FATF). And the European Banking Authority (EBA), must identify and validate companies and UBOs.

 

Fraud Prevention: Know Your Business verification assists companies to eliminate fraudsters among their corporate allies. As a result, reducing and empowering the company’s reputation by eliminating terror funding and money laundering risks.

 

Some red flags, are important to notice ahead of time:

  • Company verification and validating shipping address
  • There could be chances of errors in official documents
  • Change in company’s ownership

Final Remarks

In the end, Know Your Business verification helps organizations build trust and confidence, which enables them to sign a contract and begin a business relationship. Risks decrease by automating the entire process and maintaining constant data monitoring among partners. Business relationships protect and operational costs reduce for ample business verification services.

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