Many businesses fail to identify regulatory requirements and the increasing fraud rate. The sources are hard to spot because of the bunch of vulnerabilities businesses can be exposed to. Customer identity verification that is considered mandatory in financial institutions to prevent bad actors. Considering this, most of the online businesses are now taking it on a serious note. Online identity verification is conducted to verify each onboarding entity through online document verification, biometric authentication, 2-factor authentication, etc.
Other than this, even after identity verification practices, a large number of fraudulent activities take place. To identify the reason behind this, identify what other entry points are there in your system and for whom. Third-party service providers, your business partners, businesses you are dealing with, etc. All these entities are the ones with whom you collaborate on a daily basis and are not aware of their authenticity.
Know Your Business ‘KYB’, is a process to verify the businesses your company collaborate to take or provide services. Knowing business is crucially important to combat high-risk fraud as a result of any fraudulent third-party service or business. To combat digital data breaches, identity theft and unauthorized access to your company’s confidential data, business verification holds significant importance.
Regulatory Approach – Know Your Business Compliance
The advancements in technology gave concepts of digital data sets that are virtual, have opened new ways for money laundering, terrorist financing, and similar frauds. They are hiding under these innovative virtual technologies which get complex for regulatory authorities to understand. KYB compliance can help businesses deter the risks of malevolent actors by identifying the authenticity of businesses and verifying the Ultimate Beneficial Owners (UBO) to eliminate the chances of your company from being misused by any third party or business.
Regulatory scrutiny also involves AML compliance with respect to the verification of businesses and UBOs. this is important to identify that your partners are not involved in any criminal activity before or currently. For this, verify them against a list of sanction lists, Politically Exposed Personalities (PEPs), and criminal databases.
Just like Know Your Customer, in which each onboarding identity is verified against several identities and AML checks, in the same way, Know your Business includes verification of business entities. For this, integrate a KYB compliance API with your system for real-time verification of corporate entities in seconds. Prevent the possibilities of illicit finds transfer from entering your company through unregistered or fake companies. Know your business is important to identify and eliminate the chances of connection with fraudulent corporate entities.
AML Regulation are Stringent w.r.t ‘KYB’
Many global and local regulatory authorities demand businesses to verify the Ultimate Beneficial Owners (UBOs) to which they are dealing. For instance, Fifth Anti-money Laundering Directive (AMLD5) declares verification of UBOs mandatory. Even the member states are required to make registers of UBOs and identify the associated risk. UBOs verification against the AML checklist is considered necessary against several criminal databases and watchlists. Also, the General Data Protection Regulation (GDPR), FinCEN, and PSD2 have declared UBO verification a mandatory step in an organization.
For regulated companies, to keep the business reputation in place, and avoid harsh regulatory fines, it is crucially important for companies to verify its suppliers, vendors, thord-p[arty service providers, and other corporate entities. To avoid your company from being misused by money launderers, terrorist financiers and fraudulent owners of other businesses AML verification is necessary. KYB compliance along with KYC contributes to seamless business norms. This helps businesses prevent third-party frauds, identity theft, and incidences of data breaches