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KYB Due Diligence: Streamline Compliance With AML/CFT Regulations

KYB Due Diligence

Financial institutes and companies that work with them, such as fintech, cryptocurrency, online gaming, etc, must meet rigid regulations. These laws are according to state and national policies. The United State Factional Action Task Force (FATF) implements AMLs 4 and 5 to protect companies. Anti-Money Laundering (AML) and counter-terrorism financing (CFT) are compulsory for many businesses to protect them from financial scams and criminal activities. The USA Patriot Act was enacted in 2002 to safeguard companies from fraud. But this is only for individual customer identification, and there is a gap between verifying the business and scammers taking advantage of these loopholes. In 2016 regulatory chambers introduced enhanced KYB due diligence and ensured all companies comply with these regulations. Non-compliance with these laws can cause organizations to unwanted fines and financial fraud.

Difference Between KYC and KYB Due Diligence

KYB or know your business verification is essential to comply with AML and CFT regulations. It is an extension of Know Your Customer (KYC). In KYC, companies verify individual customer verification and conduct risk assessments. The main difference is in the KYB process, companies verify the business legitimacy and activities so they can onboard real businesses. For that, due diligence in KYB focuses on the company shareholders, owners, and suppliers before onboarding them. It ensures that corrupt business owners do not misuse their services. Banks and other financial institutes are vital sources for criminals to launder money and disguise their illicit funds. Ultimately, KYB and KYC aim to protect companies from financial scams.

How Companies Perform KYB?

Companies involved with other businesses must meet the AML regulations before onboarding businesses. And compliance with these obligations is impossible without AI-powered know-your-business verification. It protects companies efficiently from scams and offers seamless compliance with various regulations. Below are stages of how companies can enhance business verification AI in the KYB process.

1: Collect Information 

The first step is to collect information about the business. It is primary data such as registration number, tax identification, company name, address, contact details, and other relevant data. Companies can collect this information from business verification service providers’ online platforms. Their business partner has to only register on the online website and provide the required information and documents remotely. Customers do not have to visit the office to submit the corporate public papers physically; all this information is easily accessible to the onboarding companies.

2: Verify Documents

After collecting all information, the KYB service uses AI and machine learning technology to enhance the verification process and promptly gather accurate results. For the KYB due diligence, first, it will check the company’s existence. The business can verify company registered numbers from the relevant corporate industry or other regulatory bodies. It proves the company is legally registered and shows its existence. Once the existence is confirmed, the onboarding software checks the provided documents and the data. The online KYB due diligence system attests the papers by verifying security features such as holograms, signatures, borders, fonts, etc. It guarantees the documents are authentic, not counterfeit or manipulated. To confirm, the scammer does not design the data written on the papers. The verification tool will extract the data and cross-checks these with government databases so that all information is accurate and legal. For the due diligence in the KYB, online corporate onboarding software also cross-references this data against the watchlist, such as politically exposed persons (PEPs) and criminal lists. To onboard businesses that work in high-risk industries, companies can conduct enhanced due diligence (EDD) by screening businesses and individuals against national and international lists.

3: Identify Ultimate Beneficial Owners (UBOs)

All the business stakeholders who own 25% of the company are beneficial owners. They have direct control over the business and make most of the decisions. For the KYB due diligence, it is necessary to conduct KYC of all these UBOs. This ensures they are not involved in illicit activities and check their financial history to clear their integrity. AI-Powered know your business software verifies all individuals by their documents and provides a risk assessment report according to their transactions history. It also cross-checks their bio-data against watchlists such as money launderers and criminals to ensure they are not involved in illegal methods. Implementing AI measured in the business verification enhances onboarding and provides ultimate protection from financial fraud. Onboarding companies can reap accurate results and monitor the risk assisted with business and their shareholders.

Final Note in KYB Due Diligence 

Nations and states have different policies, and businesses must comply with these various regulations to onboard with any financial institutes. These regulations constantly change with time, the AI in KYB assists companies in customizing the onboarding process and risk assessment algorithms so they can onboard any business confidently. Overall AI-powered know your business is the future, making the business onboarding process straightforward and compliance regulation easy. The KYB is the perfect tool to protect companies from money laundering and provides business partners seamless onboarding experience.

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