Time to evolve your approach to know your business (KYB) checks

Fraud, whether by an individual or a business, is on the increase. This is largely due to many banking services being accessible online – a convenience that comes with some risk.

To help prevent fraud, as well as to ensure compliance with existing know your customer (KYC) and Anti-Money Laundering (AML) regulations; know your business (KYB) and KYC checks must be performed in tandem.

The issue is that KYB has often been viewed by those in financial services as a necessary regulatory ‘add on’ to their counter fraud activity, with KYC activity usually given more attention.

This results in little thought being given to KYB, as long as a compliance box is ticked. This is unfortunate, because financial institutions may be investing the bare minimum in KYB which might be enough for the regulators, but not for their requirements, or possibly investing too much beyond what they need and regulations require. Furthermore, procuring KYB as an ‘add on’ is often not a financially beneficial or best practice way to deliver KYB with the growth in full service identity verification platforms.

When undertaken effectively KYB screening enables financial organisations to fully comprehend the risks posed by new and existing business customers and suppliers. This is important because fraud is often committed by shell companies or organisational structures that just don’t exist in reality, so KYB checks can greatly lessen the opportunity for that type of fraud from occurring. This approach will also help to prevent financial crime, such as money laundering and terror financing, which could result in considerable reputational damage.

How to deliver effective KYB screening

To successfully implement KYB screening you first need to understand the difference between KYC and KYB checks. With KYB it’s not simply a case of verifying a name, address, date of birth, for example, as is done for an individual, although this data is obviously important for both KYC and KYB checks. For a reliable and cost-effective approach to KYB screening it’s advisable to cross-check a company name, address, business registration number, and operational status. While it’s possible to undertake a more in-depth KYB screening process, which includes identifying any person with significant control – the beneficial owners, the company’s annual returns, or financial statements – the benefits must be weighed against the often significant investment in taking this approach. This is why spending time reviewing what KYB checks are currently being undertaken by your organisation is very important. In particular, in making sure that you have the appropriate level of screening to protect your organisation while ensuring compliance with the regulations.

Access eIDV platform with integrated KYB and KYC functionality

To effectively implement KYB and KYC checks globally, it’s preferable to source a comprehensive electronic identity verification (eIDV) platform that provides both. Growing fraud has made such services increasingly popular, particularly because they are available as a software-as-a-service (SaaS) so easy to deploy, scalable, and support real-time cross-checks against an individual’s contact data and company data.

The eIDV platform sourced must have access to reputable global data streams, such as government agency, credit agency and utility records, to match the name, address, date of birth, email, or phone number, along with recognised sources of business data, such as from a business registry or regulator, like Companies House. It should also offer mortality screening checks to effectively confirm the ID of an individual and be able to highlight any errors in the data, such as a typo in the address, which can easily be corrected.

It’s important that the service provides access to worldwide sanctions and politically exposed person (PEP) data, as well as adverse media checks of both individuals and businesses to deliver a full ID verification service. It’s the best way to prevent scammers, while also supporting best practice KYB and KYC. Additionally, accessing all this in one place provides an economy of scale – rather than buying everything in separately, and potentially from different suppliers.

Those in financial services need to evolve their approach to KYB with fraud on the increase. This requires them to have a greater understanding of the KYB checks being delivered by their organisation, and ensuring these are appropriate for their and the regulators needs. They should also recognise the considerable benefits of delivering KYB, along with KYC, using a full-service eIDV platform.