Businesses that interact with multiple companies on a regular basis to perform transactions and establish B2B relationships are required by law to perform know your business checks. Money laundering, terrorist financing are common illegal activities practiced amongst fraudsters. By utilizing shell and unverified firms, money launderers and terror financiers take advantage of the corporate sanctity. Aside from engaging with third-party corporations, businesses must also deal with consumers. To develop strong corporate interactions, it is critical for firms to use KYB solutions. According to the BCI supply chain analysis, about half of the organizations polled failed to do adequate and effective due diligence.
How effectively an entity complies with rules determines its long-term viability and success. Poor or inefficient business services may lead to engagement in illegal activities regardless of the size of the company. As a result, it is critical in verifying businesses to identify and authenticate all past and prospective business relationships.
What is Know Your Business Checks?
The verification of a business entity to see whether they engage in any unlawful behavior, such as money laundering or funding terrorists, is known as Know Your Business Checks. Businesses may manifest rules and comply with consumer due diligence by monitoring these behaviors. Corporations may ensure that their firms engage with only legitimate organizations by using KYB checks, rather than entities that exist only on paper, such as shell companies.
KYB checks also do due diligence on the firm, such as evaluating its registration number, validating its business license, and verifying their C level suite’s involvement in any unlawful activities.
Regulatory Compliance – Business Verification Services
Regulatory organizations in all nations insist that all enterprises working with foreign corporations use precise and trustworthy anti-money laundering procedures. These laws also compel businesses to authenticate papers in accordance with rules such as the Electronic Identity Verification and Anti-Money Laundering Directive.
Because of the essential insights they give, all major businesses should invest in these know your business verifications. Know your business verification improves the quality of the customer experience in addition to offering authority and credibility to the firm.
What Are the Consequences of Non-Compliance?
Noncompliance with regulatory sanctions might expose companies to a variety of illegal behaviors. If a company is discovered to be involved in any criminal actions, it may face serious penalties such as a tarnished image, fines, sanctions, or even a permanent ban.
The KYB Verification Process
KYB verification is similar to KYC verification in that it checks to see whether you are who you say you are. The sole distinction is that KYC refers to consumer verification while KYB refers to company verification. APIs are used to obtain official client data, which is used to verify the legitimacy of the company. Companies should consider the following issues while doing business verification.
Businesses verification is performed in multiple steps such as
- Checking the address of the business- Validating it’s authenticity
- Checking whether which type of business is conducted
- Inquiry about its status as of now
- Confirming the UBOs and the related relationships
- Checking the authenticity of the trademark registration number
- Validating the previous name of the business for know your business checks
2. Business Filings
All of a company’s financial papers, such as financial statements, sources, and linkages, as well as its collaborating firms, are confirmed. Furthermore, downloadable papers, such as the annual accounts and shareholders list, are extensively examined.
3. Business Statements
These statements assist all firms in staying up to speed on any changes in the businesses with whom they do business. For example, their board of directors or shareholder list may have changed. These changes are tracked and examined for any criminal activity that may be occurring as a result of the changing activities.
4. Business Networks
Corporations are given a thorough examination to see whether they have any subsidiaries or parent companies. These networks include details such as the location of the registered firm and the kind of transactions conducted.
Manual Know Your Business Verification
Manual or digital methods of identity verification are available.
Manual know your business verification has a number of downsides, including:
- It’s a time-consuming process; reviewing and investigating the organization’s structure and listings one by one, then recording everything takes time.
- It necessitates a great deal of paperwork – Documentation of these verifications necessitates a great deal of paperwork, and locating information once these documents have been preserved is another challenging chore.
- It’s difficult to keep up with ever-changing rules.
- Human mistakes are common in manual business verification, which may result in significant penalties.
- The name of the firm, the jurisdiction code, and the registration number are all that is required for online company verification.
To Bring It All Together
Because firms lacked in various dimensions, it was almost difficult to escape penalties due to strict and complicated regulatory requirements. They lacked the necessary resources, time, and expertise to efficiently know your business checks. However, KYB rules may be readily met with real-time online company verification services, which will become the standard over time.