Know Your Business (KYB)
Similar to KYC but for corporate clients, KYB involves verifying the business entity, identifying its ultimate beneficial owners, understanding its corporate structure and operations, and assessing the potential risks it poses. KYB can be performed manually, via KYC/KYB software, or a mixture of the two, and makes use of different KYC databases such as sanctions and PEP lists, public registries, and even trusted news sources.
This is done to stay compliant with AML/CFT regulations and protect financial institutions from risks such as unknowingly participating in money laundering or the financing of terrorism.
Business verification, corporate KYC
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KYB
Examples
A startup applies to open a new corporate account. Before the account can be approved, the bank must perform KYB. During this process, the bank verifies the company’s registration and identifies the beneficial owners of the startup. This bank in particular only looks for individuals who own 25% or more of the company or have significant control.
After identifying the beneficial owners, the bank performs KYC checks for the owners, checking whether they are under sanctions, are Politically Exposed Persons, or are known criminals. As an extra measure, the bank also performs an adverse media check to see whether the company or its beneficial owners have received any negative press.
The bank also looks into the business itself and determines the nature and purpose of their new account. After having done so, the bank determines that the startup doesn’t present a high risk and approves the account. However, they still monitor the account as part of KYB, performing KYB checks in regular intervals or when suspicious behaviour is flagged.
FAQ
How does KYB differ from KYC for individual clients?
KYB focuses on verifying the business entity, identifying beneficial owners, and assessing the company's activities and risk profile.
What documents are commonly required for KYB?
KYB often requires corporate registration documents, ownership structure charts, financial statements, and identification of key controllers.
How can banks verify corporate ownership structures?
Banks can use corporate registries, request documentation from the client, and use public data sources to map out ownership chains.
