Customers are not only individuals, but businesses too. Anti-money laundering regulations instruct organisations to monitor and protect against suspicious activity. The main focus of the checks undertaken is to establish the identity and ownership of the company being dealt with, along with the primary owner – or ultimate beneficial owner.
Know Your Business (KYB) refers to the due diligence review of a business that a company is getting involved with. AML regulations require that checks are carried out on any potential business customer to verify its identity and authenticity to prevent money laundering or other financial crime. KYB checks are able to validate businesses against public and commercial sources, checking stakeholder identities, as well as complex business structures and ultimate beneficial owners.
Identifying an ultimate beneficial owner
An Ultimate Beneficial Owner (UBO) is a person, or entity, that is the ultimate beneficiary when an institution initiates a transaction. It also includes those legal persons who exercise ultimate effective control over a legal person or arrangement.
An Ultimate Beneficial Owner of a legal entity or a natural person that could be:
- Anyone that has direct/indirect control
- Shareholders
- Power of attorney
- Guardian for minors
The ultimate beneficial owner is the individual who ultimately owns or manages a company. This is a person who owns more than 25% of the company shares as well as exercising significant control over the company. Identifying and monitoring the UBO prevents clients from doing business with anyone involved in financial crime or those with illegitimate funds.
KYB checks should identify the UBO of the company and any major shareholders, with their details checked and reported including business addresses, business license’s and registrations, and identification documents of the ultimate business owners. Businesses and individuals should also be checked against sanction and Politically Exposed Persons (PEP) lists.
Why is KYB so important?
By obtaining and verifying essential information about the companies they are dealing with, organisations can ensure that every business being onboarded is legitimate and not ultimately funding criminal activity of any kind. Ultimately, undergoing KYB monitoring is for the safety and protection of your business.
Due to the ever-changing and complex regulatory landscape, remediation is a critical part of KYB. This process involves cleaning and updating the information gathered during the initial client onboarding phase and ensures that businesses remain compliant with all the latest regulation throughout the entire relationship.
Companies that don’t undertake sufficiently comprehensive KYB checks and monitoring not only open themselves up to fraud but hefty fines for failing to comply with legislation, and the subsequent reputational risk that fraud and fines can bring.
Benefits of an automated KYB process
In today’s always-on world, businesses are expected to keep up. Clients will expect a quick, efficient and simple compliance process to make their lives easier and to improve their customer satisfaction.
- Alleviate manual KYB processes: Reduce the time to revenue by speeding up KYB checks and focus on growing your business, safely
- Gain complete customer insight: Make better risk-based decisions based on data you gather about the businesses you onboard and continue to monitor
- Onboard and monitor businesses at scale: Real-time identification of high risk businesses and custom alerts to stay on top of client changes
- Continually improve KYB processes: Automated data analysis identifies bottlenecks, cases which are auto-approved, average processing times and more, so you can continually improve your KYB compliance and risk management processes
- Gain a complete picture of customer activity: Continuously monitor businesses for any changes in their risk profile, including changes in ownership, adverse media and credit reference agency information
At NorthRow, you can completely automate your KYB (and KYC) processes, streamlining compliance and reducing risk with automated ID verification, PEP, sanctions and watchlist screening, enhanced due diligence, and AML workflows.
Deliver a friction-free, enjoyable business onboarding experience for your clients in less time, at a lower cost, and with less manual effort for both parties.
Take a look on our website for more information, or book your free demo here today.
