Did you know that between 2008 and 2018, companies received $26 billion in fines for non-compliance with anti-money laundering regulations? Well, that’s a lot of money that could have been saved simply by automating the KYB and KYC processes.

Today we want to talk to you about KYB, the verification process to identify businesses, suppliers, and freelancers. In this article, we explain what it is, its benefits, and how to implement it.

What is KYB – Know Your Business?

No, we’re not talking about the giant Japanese automotive company. In this case, the acronym KYB stands for Know Your Business.

It’s a process that involves deeply understanding the key aspects and details of a business: it is a tool used by financial entities to verify and identify a company before working together.

Through KYB, you can analyze various aspects of a company such as background, financial status, and corporate reputation – important data that needs to be known before establishing a business relationship between two different entities.

Many institutions (like the aforementioned financial entities and payment companies), as well as businesses providing professional services to other businesses, are required to carry out this process due to anti-money laundering and counter-terrorism financing regulations.

This process is regulated by various laws in Europe, including the Anti-Money Laundering Directive (AML5), the Payment Service Directive (PSD2), the General Data Protection Regulation (GDPR). These regulations aim to ensure proper compliance in identifying and verifying businesses with which one wishes to establish commercial relationships.

What are the main differences between KYB and KYC?

KYC and KYB are acronyms used in the financial sector to describe identity verification processes for individuals or companies. Although both processes verify digital identity, each has a specific purpose and target:

  • KYC Process: Standing for Know Your Customer, it refers to identifying and verifying the identity of an individual or customer before establishing a business relationship with them. This process is done to comply with anti-money laundering regulations and to prevent financial fraud.
  • KYB Process: Refers to the identification and verification of a business’s identity before establishing a business relationship with them. This is done to comply with anti-money laundering regulations and to prevent illicit commercial activities.

Why is KYB verification important for businesses?

Here are the main reasons why KYB verification is so important for all types of businesses:

  • To legally comply with the law: KYB verification is a legal requirement in many countries and is regulated by anti-money laundering norms. These regulations aim to prevent the use of the formal economy for illegal activities such as terrorism, corruption, and drug trafficking (we’ve already covered this topic in our blog).
  • To prevent illicit activities and combat fraud: this process helps you prevent business relationships with fictitious or illegal companies. By verifying the identity of a company and its owners, you ensure that the company you’re establishing a commercial relationship with is legitimate and not involved in illegal activities.
  • To improve trust with your customers and other entities: by conducting proper KYB verification, companies can enhance trust in their business relationships. Verifying the identity of a company and its owners demonstrates to the other company that measures are taken to ensure transparency and integrity in commercial operations.
  • To protect your reputation: by avoiding business relationships with illegal or fictitious companies, you protect the company’s reputation and prevent any association with illegal activities that could negatively affect its public image.

What are the benefits of automating the KYB process?

We’ve talked about the importance of KYB verification. But what are the real benefits of automating this process?

  1. Increased efficiency: using technology to verify a company’s identity makes the process faster and more efficient. This means that companies can establish business relationships more quickly, resulting in increased productivity and business growth.
  2. Cost reduction: by automating this process, companies can reduce costs related to hiring additional staff or acquiring expensive software.
  3. Fewer human errors: reduces the possibility of human errors, which in turn improves verification accuracy and trust in the company’s identity.
  4. Improved transparency: companies can enhance the transparency and security of commercial transactions, thereby boosting the trust of customers and suppliers.
  5. Regulatory compliance: by automating the identity verification process, companies can comply with applicable laws and regulations, improving their reputation and minimizing the risk of penalties and fines for non-compliance.

What are the steps to complete KYB verification?

Here is the common KYB verification procedure:

  • Verification of the company’s registration documents. Business registration and commercial license are verified to confirm we’re dealing with a real, active business.
  • Verification of the Ultimate Beneficial Owner (UBO). It’s necessary to know the members of a company to understand its environment. Knowing who the UBO is and what they do allows for an understanding of the network’s nature, thereby ruling out the possibility that the organization might be a front for any illegal activity.
  • Checking negative media coverage: for example, knowing how a company treats its suppliers or customers.
  • Detection of Politically Exposed Persons (PEPs). These are individuals in public positions who may be vulnerable to fraud, corruption, blackmail, etc. For this reason, it’s important to see if these individuals are associated with the company.
  • Checking blacklists. Authorities compile data on individuals and organizations that have conducted (or continue to conduct) illegal activities in sanctions lists. Checking if a corporate buyer is on such lists involves filtering large amounts of data.

How do we carry out the KYB verification process at Silt?

Reviewing organizations and freelancers is tedious and time-consuming. For this reason, we handle it all.

We verify companies by connecting to BORME [Official Gazette of the Mercantile Registry] and other really important registration libraries, depending on the country you need: in this way, we confirm that a person who has already passed KYC has powers within the company. This way your company will get legal information and also address, activity, administrators, agents, or tax identification number among others.

And yes, we also verify freelancers: in this case, we connect with the Tax Agency and verify models to confirm that the professional is active. Then, we will return their information.

Very important: this process follows the “Regulation for the prevention of money laundering and terrorist financing Royal Decree 304 2014 ART 6 B”.

Want to know more? Here we leave you all the information you need.