What is Know Your Business (KYB)?

Know your business (KYB) refers to the process of identifying and verifying a business customer, particularly legal entity customers of certain industries such as banks and payments businesses.  It is a regulatory requirement of certain industries, such as banking investment, insurance, and other financial institutions, to perform due diligence on and verify the identity of any businesses that they partner with or onboard as a customer. It is also a critical tool for any organization that wants to be confident about its business relationships or that may partner with regulated companies to provide related services to them.

KYB was originally an extension of a more general requirement that certain companies must know and verify the identity of customers, commonly referred to as know your customer (KYC). However, industry usage of the terms KYB and KYC have become more specific and distinct over time. KYC now typically refers to verification of individual persons instead of businesses or legal entities, whereas KYB typically refers to verification of businesses and legal entities and not individuals.

What does KYB Check?

Businesses should generally perform KYB procedures during initial customer acquisition and onboarding efforts, but they may also need to be performed on an ongoing basis so businesses have continued, up-to-date confirmation of their business partners and to meet regulatory standards and company goals. While this work can be done manually as a starting point, companies often turn to data providers and automated processes to both enhance and streamline KYB efforts.

Exact KYB requirements may differ by country and jurisdiction, but as part of due diligence requirements, companies typically:

Check the business profile and documentation

KYB often begins by checking the basic information about a business and ensuring that it is active and accurate. Relevant documentation could include:

  • Legal business name
  • Business locations and addresses
  • Contact information, including phone, web, email, and social media accounts
  • Business registration number and incorporation data
  • Legal and operational status
  • Subsidiary companies, if any
  • Executive leadership and other key personnel
  • Number and location of employees
  • Any other registration or licensing documentation

Perform a risk analysis

Risk is at the heart of KYB, so as part of verifying the basic information about an organization, an institution performing KYB procedures will typically also examine a business’s risk factors relative to the institution’s own risk profile. This could include whether the business is in a commonly classified high risk industry such as cannabis, gambling, or adult entertainment. It may also include more detailed information about the business if available, including expenses, debts, litigations or legal liabilities, economic or government sanctions, tax burdens, current suppliers and partners, and any other factors that could adversely affect or compromise it.

Look for corruption and personnel liabilities

In addition to common risk factors, businesses that operate within politically corrupt environments or have politically exposed personnel (PEP) are at a greater risk of being involved in money laundering or other illicit activities. KYB may include screening for these factors as well to gain a complete view of the risk a business poses.

Monitor their media presence

A company’s public presence can provide key insights into their health and compliance, both in their own public relations and social media posts and in what local and national media report about them. Suspicious or negative news stories should be included in the overall view of a business.