Know-your-business (KYB) and know-your-customer (KYC) are compulsory for financial institutes and other organizations which work under the regulators’ authorities. Verifying a business assists companies in detecting the identity of the customer before onboarding. In this fast-paced life, it is essential to know your business partner. KYB is an ideal procedure for organizations to protect themselves from money laundering and avoid fake businesses.
According to the United Nations Office on Drugs and Crimes, 3-5 percent of global GDP is lost to money laundering, estimated at $800 billion- $2 trillion. Moreover, the Financial Crimes Enforcement Network (FinCEN) reports that banks have contributed $2 trillion in suspicious payments worldwide. This is how digital KYB verification comes into play and protects financial institutions from money laundering and other scams. Business verification is a process to identify the business owner’s identity and check the business’s legitimacy. Verification of the business helps financial institutes mitigate risk, secure onboarding and effective compliance, and make a decision confidently.
Powerful Know Your Business Verification Process
Implementing the latest KYB verification enhances the process and saves the time and cost of the financial institutes. In the traditional verification process, organizations have to manually check the legitimacy of the businesses. Business owners provide all information about the company and the ultimate beneficiary owners (UBOs) to the financial institutes. The KYB is a daunting task for any organization to check business legitimacy and verify all the shareholders. But by using the right tools and procedures, all companies can streamline the verifying business process. Given below are the powerful steps of online compliance with know your business regulations.
Ensuring Business Legitimacy
In the beginning of the process, the KYB verification financial institutes must confirm the business is legal and registered. Most of the time, scammers use fake names and try to register with someone else’s company. It is vital to implement know-your-business solutions to eliminate the chance of these frauds. Business verification services offer financial institutes to check the papers effectively and make sure the company exists in real life, not only in papers. Reviewing these documents is critical to ensuring the company’s authenticity and proving its existence. This data consisted of the company’s registration number, legal name, address, operational status, key staff, and date of organization.
Examine Business Profile
It is a must to ensure the companies’ backgrounds and check the location of the company office. For the KYB solutions, financial institutes access company operations, including customer data and product or service suppliers, throughout the profile analysis. To validate this check, businesses must collect financial statements and business histories. According to the regulations, it will assess the company’s economic condition by setting financial documents such as balance sheets, income statements, and cash flow statements.
Enhance Risk Assessment
Conducting a risk analysis of a business before onboarding is a critical step in evaluating and ensuring that the business corresponds with the less risk of the onboarding firm. It is vital to analyze the specific risks associated with the industry in which the company operates. Businesses should compare factors such as market competition, regulatory changes, technological advancements, and economic conditions that could impact the business’s performance and sustainability.
Verifying the Ultimate Beneficiary Owners (UBOs)
The company’s ultimate owner is the person who manages or runs the business. These are not the business owners, most of them are shareholders. According to the anti-money laundering regulation (AML), verifying everyone with a 25% share in the company is compulsory. Because all the persons with 25% are official UBOs of the company, they have voting rights and control the decision of the companies. All financial institutes working internationally must identify UBOs of the business before onboarding to protect themselves from financial fraud and criminal parties. Companies can verify their identity by implementing KYC on each owner. In the verifying process, the onboarding companies have a right to gather all personal information of the company shareholders. Furthermore, to examine these documents, including cross-checking against personal details and with government watchlists thoroughly by machine learning technology.
Simplify KYB Process by Leveraging Technology
The IT sector always works on the latest inventions to solve problems and reduce the company workflow. Online know-your-business (KYB) solutions providers use advanced machine learning and AI technology. These powerful tools can convert the time-consuming and costly procedure into streamlined and pocket friendly for companies. It also reaps accurate results and immensely affects the customer onboarding experience. Customers can submit documents and personal information from home through digital KYB verification platforms. Companies can confidently onboard new businesses from any state and region without the risk of illicit activities. Simplifying the business verification process for the owners increases the companies’ new customer onboarding ratio. It also builds a trustworthy environment between the customer and companies.
