What Are KYB Checks?

You might be wondering if KYB checks are really all that important? Perhaps you don’t want to ruffle feathers and make potential customers feel like you don’t trust them at the start of the relationship? We get that. But trust isn’t going to keep your business running.

You need to run a KYB check on every customer and supplier so you can know, thanks to real-time data, whether they’re involved in money laundering, fraud or have compliance violations.  Data provided by a KYB check is far more reliable than trusting that your customers and suppliers will willingly volunteer that information.

Here are some specific things you can verify with a KYB check:

• Check that a company is properly registered as a business 

• Check that all directors and officers are properly listed 

• Find the correct ownership structure of a company 

• Check if a company has compliance alerts, indicating potential violations

• Check that a company’s financial health is in good standing and that it is a reliable payer (through their payment data) 

It can be easy to confuse KYB checks with KYC checks. While KYC checks are about confirming that individuals are who they say they are, KYB checks are focused on validating the legitimacy and operational status of a business. Both types of checks are necessary, but each has a specific role. 

If ever in doubt, remember this. KYC checks deal with the people who are involved in a business. Meanwhile, KYB checks deal with the companies – making sure they’ve actually been formed and are operating legally. 

KYB checks are not just a formality—they’re a legal and practical necessity for safeguarding your business. Major AML regulations, such as the Bank Secrecy Act (BSA) and the Anti-Money Laundering Act of 2020, require businesses to implement KYB as part of their compliance programs. Here's how KYB checks can help:

• Verify ownership structures: KYB checks identify the ultimate beneficial owners (UBOs) of a business, ensuring you know exactly who you’re dealing with. This prevents criminals from hiding behind complex corporate structures.

• Identify high-risk entities: By running KYB checks, you can flag businesses or individuals associated with financial crimes or high-risk industries, allowing you to take appropriate precautions.

• Ensure ongoing monitoring: Compliance doesn’t end with onboarding. KYB checks facilitate continuous monitoring to ensure that partners and customers remain compliant with AML requirements over time.

• Streamline regulatory reporting: KYB checks consolidate essential data, making it easier to comply with reporting obligations for regulators like FinCEN or the Financial Conduct Authority (FCA). 

Several major regulations have made KYB checks mandatory as part of broader AML efforts:

• Bank Secrecy Act (BSA) of 1970: The BSA is one of the foundational laws in the fight against financial crime in the U.S. It requires financial institutions to maintain detailed records of transactions and report any suspicious activity that could indicate money laundering. KYB checks are a crucial part of this due diligence, helping institutions confirm that the businesses they’re dealing with are legitimate and active.

• USA Patriot Act of 2001: Following the tragic events of 9/11, the USA Patriot Act significantly expanded AML regulations to tighten security around financial transactions. It introduced stricter requirements for verifying not just individual customers but also businesses. This law has been instrumental in vetting companies thoroughly for their involvement in money laundering, financing of unlawful organizations, and other illegal activities.

• Anti-Money Laundering Act of 2020: The AML Act of 2020 introduced even more rigorous compliance standards to keep pace with evolving financial crimes. One of its key elements is the emphasis on KYB checks, making them an essential part of the process to ensure that businesses are not used as vehicles for laundering money or conducting other illicit operations. By performing thorough KYB checks, companies can demonstrate their commitment to AML regulations and avoid hefty fines or reputational damage.

• Collect business information: Start by gathering the company's legal name, registration number and country of incorporation from public registers.

• Verify company registration: Check that the business is properly registered and in good standing with the financial authorities.

• Assess ownership structure: Identify the company’s beneficial owners so you have full visibility into who owns the business, if it has a parent company and sister companies and any other relevant stakeholders. 

• Review financial statements and payment behaviors: Analyze the company's financial statements over the last two to three years to get a clear picture of how they manage their cash flow and if they can continue operating long term. Plus, review their payment data over the last 12 months to see how well (or late) they pay their bills. This will provide a clear indication of whether they can pay you on time. 

• Check for sanctions and PEPs violations: Cross-reference the business and its owners against international sanctions lists and Politically Exposed Persons (PEPs) databases.

• Continuously monitor throughout their lifecycle: You shouldn’t just run a KYB check at the start of working with a customer or supplier. You should be monitoring them throughout their lifecycle. Why? Because circumstances can change, new laws can be introduced, updates can be made to existing laws and new teams may come on board.  

We’ve talked a lot about why KYB checks are essential for identifying serious risks and protecting your company’s reputation. But we also understand how challenging compliance processes can feel. That’s why we developed KYC Protect—to simplify and enhance the KYB process for your business.

Instead of diving into features, let’s focus on the tangible benefits your business can achieve with KYC Protect:

• Fewer Compliance Violations: By ensuring comprehensive checks on directors, shareholders, and ultimate beneficial owners (UBOs)—the individuals who ultimately own or control a company—KYC Protect helps you reduce compliance violations and meet regulatory requirements with confidence.

• A Digital Audit Trail: KYC Protect creates a clear, accessible record of all compliance activities, making it easier to demonstrate due diligence during audits or investigations and streamlining reporting to regulators.

• Reduced Regulatory Fines and Lawsuits: Avoid the heavy financial and reputational costs of compliance failures. KYC Protect helps you identify risks early, reducing the likelihood of fines or legal action due to missed red flags.

• Improved Bottom Line: By mitigating the financial impacts of hefty penalties, lawsuits, or reputational damage, KYC Protect safeguards your profitability and long-term growth.

• Efficient Risk Management: Cut down on false positives by up to 80%, allowing your compliance team to focus on genuine risks instead of wasting time on irrelevant alerts.

With KYC Protect, you can build trusted partnerships, reduce risk, and ensure your business operates smoothly and compliantly, no matter the regulatory landscape.

KYC Protect helps you complete KYB checks with ease and accuracy.

You’ll be able to:

• Monitor profiles for changes like ownership shifts or sanctions alerts.

• Reduce false positives by up to 80%, allowing you to focus on real risks.

• Quickly identify directors, shareholders, and ultimate beneficial owners (UBOs) - the individuals who ultimately own or control a business, even if their names aren’t immediately visible in public records.

With KYC Protect, you can build strong, trusted partnerships, knowing that the businesses you work with are legitimate and compliant.