As the exposure to illegal activities continues to increase, it becomes increasingly important for people to authenticate and make sure about the businesses they are working with. According to UNDOC, about 2-5% of global GDP is lost to money laundering which equals the amount close to $2 trillion. Data breaches have also increased substantially over the recent past, which gives rise to virtual ID thefts.
As reported by Thomsons Reuters’ survey, banks are now spending more than $48 million on due diligence and KYB services. With the advancements in technologies and virtual data sets, verification tools can help identify businesses involved in illicit activities and fraudulent transactions. International requirements by regulatory authorities make it necessary to secure business transactions in order to prevent illegal activities and criminal financial transactions from entering the formal sector.
Regulations Regarding KYB
Businesses face stringent regulations asking them to verify and authenticate customers before onboarding them. This is highlights in the 4th AML Directive in particular as it puts a lot of emphasis on rigorous audit trails that eventually help prevent fraud and financial crime. This is why, in this era, digital verification services have proven to be very effective to perform KYB checks and AML checks for business.
Money launderers often get under the guise of businesses in order to cover their tracks. This is why the European Union is rolling out more rigorous regulations to make sure businesses are growing through proper due diligence in order to stamp out aggressors. This means legal compliance requirements for which proper screening processes become highly imperative. Other regulations such as GDPR, PSD2, and FinCEN also require companies to be aware of the Ultimate Beneficial Owners (UBOs) of all the enterprises before beginning a professional relationship.
According to the new registration demands of the anti-money laundering directive, the EU states obligate to maintain national registers of beneficial ownership information on all the companies they are doing business with. This is why all businesses and their owners have to get registered. This subsequently makes it easier to identify individuals involved in illegal activities through a business.
What is a KYB Process?
Know Your Business process is pretty similar to the Know Your Customer (KYC) process. KYB is also a verification solution that cross-checks businesses and identifies them by extracting commercial register data using APIs. By using the registration number of a business and the jurisdiction code, an efficient digital KYB service can collect verifiable information for the business. The process becomes error-free and swift through a data-powered business verification service that gives access to automated commercial registers. This eventually saves a lot of time and manpower while providing accurate results.
Following checks done in order to properly carry out Know Your Business compliance.
The business search involves background data on the company. Which involves current status, registered address, company type, previous name, trademark registration, and previous name. In the business search, a financial summary of the company’s operational accounts provide. By the authentications service which enables to validate the authenticity of the client in a more better way.
Business filings provide instant, verifiable information about the financials of the company and also give access to financial statements, sources. And links to downloadable reports which include register reports, annual reports and the list of shareholders.
Business statements enable companies to stay on top of changes in management and organization of connecting businesses. Any change in the beneficial owners or directors can directly reflect in the evolving business environment. This enables to identify the need for followup information on any business matter.
Detailed information on corporate structure provides insights into parent entities and lists of company subsidiaries. Key factors under consideration should base on the country in which the business register. The nature of business activities and the value of transactions it carries out.