Technological innovation has helped companies grow and achieve milestones timely. However, it has also allowed fraudsters to create shell companies and exploit the mainstream corporate world. Business experts want to use digital solutions such as KYB solutions to combat money laundering and terrorism financing. This way, companies can establish trustworthy relationships with corporate associates and achieve mutual business interests in a timely manner. It strengthens the relationship between both entities and enhances market reputation. With KYB services, firms can easily ensure compliance with AML regulatory obligations and avoid hefty fines.
Automated KYB Solutions – A Quick Overview
KYB is an authentication requirement that confirms the legal status of an organization and compliance with AML regulatory obligations. Banking service providers and other financial institutions must perform the KYB process to check the legitimacy of business partnerships. This is a necessary approach to discourage shell companies and determine the authenticity of business partners. It empowers corporations to deter money laundering and terrorism financing cases. Additionally, automated KYB verification checks comprise Ultimate Beneficial Ownership (UBO) to ensure transparency.
Identification of UBOs reveals who benefits from the profits. Know your business verification services discourage criminals from using illegal funds as income. If a company does not perform KYB solutions, it can experience a loss of market reputation and other legal consequences.
Organizations must screen business partnerships before establishing relationships to identify Politically Exposed Persons (PEPs). This is important to discourage high-risk entities from exploiting the sensitive data of corporations.
KYB Solutions & KYC Protocols – Understanding the Differences
There are several similarities between KYB and KYC procedures. Users gave ID verification to validate customer identities and authenticate their credentials. This plays an essential role in fraud prevention.
The significant difference between KYC and KYB is who the customers are. KYC is for individual customers, whereas KYB solutions are for business entities.
Know Your Business Services Regulatory Obligations
KYB solutions are perceived as an upgraded version of KYC. In the past, when KYC and know your business measures were not present, therefore, criminals used to exploit corporations for malicious purposes.
In Europe, Lawmakers introduced KYB checks to close multiple shortcomings in the regulatory framework. The Financial Crimes Enforcement Network (FinCEN) comprises know-your-business laws in CDD requirements for financial firms.
Top 10 Data Points that Automated KYB Checks Require
There is a close connection between Know Your Business (KYB) and the laws of a jurisdiction. Generally, it comprises gathering various amounts of information on concerned enterprises. The following is a list of ten essential data points that facilitate the completion of KYB solutions:
- Basic registration data: It is the company’s name, special codes, VATs, legal status & address, phone and fax number.
- Capital: Information about the authorized capital, its status, and start date.
- Official beneficiaries: Important data about Ultimate Beneficial Owners (UBOs) that is present on business registries.
- Calculated beneficiaries: Important information about beneficiaries comes from all shareholders.
- Shareholding: Data regarding the directors who are shareholders in other corporations.
- Directorship: Data about the relationship between directors and other shareholders connected with other corporations.
- Information about shareholders: This is about collecting names, registration codes, Date of Birth (DoB), residence data, & percentage of shares.
- Managers: It is complete or incomplete data regarding potential managers, i.e., board members. This gives insight into the manager’s role, registration code, date of birth and location.
- Activity field: This section has information about classifiers, such as NACE, activity code, and start date.
- Number of workers: This includes information up to the previous ten years about employees in their company.
Performing Due Diligence for Businesses
Customer Due Diligence (CDD) is about verifying the identity credentials of clients and calculating the risk associated with their profiles. In businesses, kyb due diligence is about identifying a corporation’s Ultimate Beneficial Owners (UBOs). This facilitates the evaluation of risk levels. In case, there is a high risk associated with the UBOs. Businesses must perform Enhanced Due Diligence (EDD) before establishing long-term partnerships.
Concluding Remarks
KYB verification services demand massive volumes of data to show highly accurate results instantly. If companies still use manual approaches, it wastes the time and resources of the enterprise. The application of modern techniques eliminates human error from the process and streamlines the procedure for a positive experience.
Automated KYB solutions also cross-check customer data to identify and discourage high-risk entities from exploiting the mainstream corporate sector. This way, businesses can easily ensure compliance with KYC & AML regulatory obligations to avoid heavy fines and permanent bans. The latest approach actively mitigates fraud risk and increases businesses’ performance.
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