How KYB Verification Supports Smarter Business Verification Decisions
Did you know that 79% of organizations globally have experienced business identity theft? This stat comes from the September 2023 ‘Global Know Your Business (KYB) Survey’ that includes responses from 705 professionals across various industries such as banking, trading, payments, online marketplace, healthcare and government professionals.
So, before working with a business, doing a mandatory background check to review the business structure and its details is a must. Without a KYB (Know Your Business) verification process embedded into your onboarding workflow, you may have to rely on self-reported information, which can be outdated or misleading and cause you and your team to onboard risky or fraudulent businesses.
Understanding How A KYB Verification Works
Know Your Business or KYB verification is the process your organization can use to understand the risks associated with engaging with another business entity.
KYB involves validating official registration records, including legal status, incorporation details, and good standing against authoritative sources. This helps verify if the company is real, active, is legally registered, and whether working with them would pose a risk to your company.
A proper KYB verification process reviews ownership structure or UBO, ensures compliance with Anti-Money Laundering laws, and financial crime regulations. It should be incorporated into your onboarding workflow to ensure consistent and defensible decision-making.
Entity Intake
Start by collect details about the business, including their legal name, tax ID, registered address, formation details, and jurisdiction. You may need more details based on the risk level and regulatory requirements.
Registry validation
Check official government databases to confirm if the business actually exists. Review its operation status to check whether the entity is legally registered.
Address verification
Double-check if the address the business provided is based on a real, deliverable location and is consistent with the business profile.
Ownership review
Identify who the beneficial owners or who actually controls the company. In some cases, the real owners are behind the scenes and hidden.
Risk Screening
Screen sanctions and watchlists to check if the company or owners are associated with any sanctions lists, PEP databases, and other sources to identify potential financial crime or risks.
Decisioning and escalation
Make decisions based on the results of the KYB verification and internal risk policies. You can approve, reject, or route the business verification for review based on entity status, ownership, industry, geography, and screening results.
Risks KYB Identifies Before Onboarding
A weak business verification process exposes compliance issues and opens the door for fraud, financial losses, regulatory penalties, and harm to your reputation.
- Inactive or dissolved entities: A business may submit information that looks valid even though it is no longer active or in good standing.
- Tax and legal identity mismatches: Even a small difference between the legal name and tax identifier, if left unchecked, can create multiple issues with payments and tax reporting issues.
- Opaque ownership structures: Having an unclear and complex ownership structure can make it difficult to identify the real individuals in control.
- Jurisdictional and sector risk exposure: Risk exposure is not uniform across all sectors. There are certain geographies and industries that require additional due diligence before onboarding them.
- Fragmented evidence and false positives: Using weak and fragmented data sources for your KYB verification process can create unnecessary manual work and cause reviews to take longer.
All of these risks can slow down your onboarding process and expose you to fraud. A weak KYB and onboarding process also increase manual rework and delays, expose your organization to shell companies, and lead to more back-and-forth between teams.
Building a Smarter KYB Program for Compliance and Risk Teams
KYB verification should not be a one-time process. A smart KYB program for compliance and risk teams should operate based on of a few core principles.
- Standardized data intake should be aligned with configurable rules, policy and meet compliance requirements.
- Tiered review paths or review based on the level of risk. High-risk businesses require extra due diligence compared to low-risk businesses.
- Centralized monitoring to capture and store all verification data and documents in one system.
- KYB verification should not stop at onboarding. There should be ongoing monitoring to catch any risks even after approval.
Make Faster, Smarter KYB Decisions With Compliancely
Instead of treating KYB as a one-time process, Compliancely, a one-stop business verification platform, brings everything together in one automated KYB verification workflow. The platform helps teams evaluate and verify businesses using direct-from-source data, configurable workflows, and audit-ready logs.
By combining data intelligence with AI-driven insights and automated workflows, Compliancely offers a complete real-time KYB verification process. You can verify business identity, run TIN/EIN checks, screen 40+ sanctions/watchlists, collect registration documents, to get a full KYB profile. The platform also offers you:
- Access to company registration, ownership details, financial standing, and compliance insights in real-time.
- Tailored workflows, rules, and risk checks based on industry, region, and compliance requirements.
- KYB API or batch uploads, with real-time webhooks for easy integration and bulk verification.
- Alerts and notifications whenever a business’s status, ownership, or compliance profile changes.
- Complete audit logs, reviewer notes, and exportable reports for compliant records.
When is KYB Verification Necessary? (Explained with Real-Life Context)
Merchant onboarding for a payments platform
A merchant submits an application that appears complete from the get-go. However, when the payments platform rana KYB check, they found a tax ID mismatch. Since the issue was identified during the onboarding process, it can be corrected early so that there are no reporting problems later.
Vendor approval in procurement
A company wants to approve a new supplier. Before paying or working with a supplier, they have to verify the supplier’s information through entity status, address checks, and sanctions screening. All these checks can be done within a single workflow to ensure no risky or fraudulent supplier is approved.
Commercial underwriting review
A small business applicant is applying for credit. Its ownership structure looks simple at the start, but an ownership verification revealed a more complex ownership structure which raised the risk of fraud. The case was escalated for a deeper review before the credit was extended to them.
Marketplace seller verification
A marketplace needed to onboard multiple sellers. To do this, they ran KYB checks and escalated only high-risk sellers. Low-risk sellers were approved quickly. KYB verification enabled them to scale without weakening their controls.
FAQs
1. What is KYB verification?
KYB verification is a process of verifying the existence of a business and whether it has been legally formed, is still active, and confirming its registration status, ownership, and risk profile.
2. How does KYB improve business verification decisions?
KYB improves business decision by adding verified data such as sanctions or watchlist screening, UBO, etc., into the onboarding or approval workflow. This reduces the risk of approving risky entities.
3. What checks are usually included in KYB?
KYB checks commonly include checking for entity status, registration details, tax ID checks, address validation, screening relevant beneficial owners or controllers for PEP risk, and sanctions/watchlist screening.
4. When should a KYB case be escalated?
A KYB should be escalated when there are complex ownership structures, sanctions or watchlist matches, inconsistent registry data, tax mismatches, or risk factors outside standard rules.
5. Does KYB reduce manual review?
Automated KYB can reduce manual review by automating checks using reliable source data, rules, and exception routing in one place.
6. How does Compliancely support KYB workflows?
Compliancely combines KYB, KYC, TIN Match, sanctions/watchlists screening, address checks, and monitoring along with audit-ready documentation in a single platform.
Strengthen business onboarding with KYB, tax, sanctions, and monitoring in one platform.
