How Crowdfunding Platforms Can Stay Compliant with KYB and KYC Regulations

Crowdfunding is revolutionizing the way projects and businesses are funded around the world. And guess what? We work in this sector and have noticed that there’s very little information about how to comply with KYB and KYC regulations.

According to Statista, the global crowdfunding market reached an impressive volume of $13.9 billion in recent years and is expected to grow at a CAGR of 16.7% through 2030. With the sector’s growth, it’s super important to understand these regulations to avoid risks and ensure the trust of investors and entrepreneurs.

That’s why we decided to write this article to give you a clear understanding of how KYB/KYC processes can significantly enhance your project 😉​.

KYC and KYB in Crowdfunding: What are they and Why are they important?

Absolutely. From our experience in this sector, we’ve noticed that many platforms are still unaware of the importance of KYB/KYC processes and how to implement them efficiently. These regulations are crucial because they help identify both the investors and project creators, ensuring that funds come from legitimate sources and reducing the risks of fraud or money laundering.

Let’s start with the basics. What exactly are KYB and KYC processes?

🔹 KYC (Know Your Customer): This focuses on verifying the identity of individual users, such as investors contributing capital or entrepreneurs seeking funding. It involves collecting documents like ID cards, passports, or proof of address and applying additional checks, such as biometric verification or monitoring for suspicious activity. This ensures that each user is who they claim to be, preventing identity fraud and ensuring the legitimacy of transactions.

🔹 KYB (Know Your Business): This is essentially the business version of KYC (yes, to put it simply) and applies to companies or startups looking to raise funds through the platform. It involves verifying the company’s legal structure, identifying ultimate beneficial owners (UBOs), and checking for potential links to sanction lists or anti-money laundering (AML) watchlists.

Complying with these processes isn’t just a legal requirement in many jurisdictions, it also builds trust among investors, which can be a game-changer when it comes to attracting capital for new projects.

Why are KYB and KYC applied on Crowdfunding platforms?

Crowdfunding is built on trust. That’s the truth. Investors want to be sure their money is going to legitimate projects, and entrepreneurs need secure platforms where they can access funding without risks. Implementing KYB and KYC verification processes helps to:

✅ Prevent Fraud: Identify and block bad actors before they gain access to the platform.
✅ Comply with Legal Regulations: Align with international standards like AML (Anti-Money Laundering).
✅ Protect the Platform’s Reputation: Avoid scandals or investigations that could harm public trust.
✅ Facilitate International Expansion: Meeting global standards opens doors to new markets.

At first, implementing these processes might seem complicated, but here’s the thing: with today’s technological solutions, it’s possible to do it quickly without compromising the user experience. In our experience, an efficient KYB/KYC implementation has not only improved security but also optimized the onboarding process, reducing time and operational costs. According to our studies, 60% of our clients onboard more users without investing additional resources.

Solutions to efficiently comply with KYB and KYC

Here are some of the most effective solutions to automate and optimize verification processes on your crowdfunding platforms:

1️⃣ Automation of Verification Processes
Automation is one of the most efficient ways to meet KYB and KYC requirements without slowing down the onboarding process. Automated solutions enable:

• Instant verification of identity and business documents: Technologies like OCR can scan and validate documents such as passports, IDs, or business records within seconds.
• Integration with global databases: Automatic cross-checking with international sanction lists, PEP (Politically Exposed Persons) lists, and Anti-Money Laundering (AML) records.
• Automated alerts: Real-time detection of suspicious activity, reducing the risk of fraud.

2️⃣ Biometric Verification and Advanced Authentication
To ensure users are who they claim to be, biometric verification has become indispensable. Common technologies include:

• Facial recognition: Comparing the user’s image with their ID to confirm matches.
• Liveness checks: Preventing fraud through real-time selfies to verify the user’s physical presence during the process.
• Multifactor authentication (MFA): Combining passwords, OTPs (One-Time Passwords), and biometrics for added security.

3️⃣ Continuous Monitoring and Risk Management
KYB/KYC compliance is not a one-time process but an ongoing effort. Platforms must ensure user data stays updated and monitor changes in risk profiles. Monitoring solutions include:

• Periodic reviews of documents and business data.
• Alerts for changes in sanction or risk lists.
• Automatic profile updates based on new regulatory information.

4️⃣ Optimized User Experience
Balancing regulatory compliance and a great user experience is crucial. Many crowdfunding platforms have leveraged digital verification solutions to streamline processes without losing conversions. Strategies include:

• Background verification processes: Allowing users to start using the platform while verification is underway.
• Intuitive and user-friendly interfaces: Providing clear instructions and support during document uploads.
• Reduced friction through phased verifications: Implementing step-by-step checks based on the user’s risk level.

5️⃣ Integration of KYB/KYC Solutions with Crowdfunding Platforms
Currently, solutions like Silt offer seamless integration with crowdfunding platforms via APIs or widgets that verify identities and businesses without requiring complex development. These tools enable:

• Identity verification in seconds with minimal manual intervention.
• Automatic adaptation to local and international regulations.
• Reduced operational costs by minimizing manual document reviews.

So, what’s the takeaway? To sum it up, you already know: with a global market growing like crazy, ensuring transparency and security through KYB and KYC processes for your crowdfunding platform is more important than ever.

Efficiently complying with these regulations not only helps you avoid legal and reputational risks but also strengthens trust among your investors and entrepreneurs, improves the user experience (they’ll thank you for it), and optimizes operational costs.

If you have a crowdfunding platform and want to try our solution for free, it’s super simple.

We’re here if you have any questions 💙​