Money laundering is a persistent issue that corporations face worldwide. According to UNODC, money laundering funds are around 2% to 5% of global GDP which incurs a high cost on the world. The alarming statistics have motivated companies to implement the latest digital services such as KYB solution to discourage crime. In this light, financial institutions can easily identify genuine companies and establish partnerships. Applying cutting-edge systems can help enterprises secure a competitive advantage and strengthen customer relationships.
The following blog discusses in detail the significance of know your business services and how cutting-edge solutions can help enterprises achieve their milestones.
Automated KYB Checks: A Quick Overview
A business verification solution is an authentication standard that confirms the legitimacy of a company and the authenticity of its ownership structure. It is a due diligence process that monitors business activities to discourage fraud attempts and shell companies from exploiting the mainstream system. To add, KYB has UBO checks to determine who benefits from the enterprises’ profits. By highlighting Ultimate Beneficial Ownerships (UBOs), it becomes easier for companies to enhance their regulatory compliance position.
KYB services ensure the following:
- Ensuring the authenticity of Business Partnerships
- Guaranteeing the genuineness of all entities and lack of participation in financial crimes
In the above context, KYB verification services are the foundation for AML regulatory obligations.
KYB Verification Regulations: Gaining Insight
Know your business checks are an extension of KYC procedures. Before introducing the KYB solution, cybercriminals got away with shell company cases and fake identities, unfortunately.
In 2016, the USA FinCEN introduced KYB regulations within CDD requirements to close the loopholes in existing protocols. This way, financial institutions, and other businesses came under the same supervision as individual entities. All companies working with another enterprise now have a standard to determine the genuineness of the concerned partner.
Top 5 Entities Who Must Perform KYB Solution
Financial firms that must partner with other companies in the fintech markets must implement KYB services. Other organizations that must comply with the regulations are:
- Tax advisors
- Gambling service providers
- Asset managers
- Credit Institutions
There are some companies that do not take KYB verification seriously and end up losing market reputation or facing fraud. For example, KYB services are highly advantageous for sharing economies and various e-commerce platforms. The application of KYB also stops the abuse of assets and discourages bad actors & shell companies.
Notable 5 Benefits of Know Your Business Services
It is essential to comply with international regulations to deter fraud and maintain the market reputation of the company. Corporations that fail to stick with KYC & AML regulations end up paying millions of dollars in fines. According to a Fenergo report, the financial sector had to pay around 5.4 billion dollars in case of non-compliance.
The arrival of innovative digital solutions has made matters easier for companies by sharing the workload and eliminating human error. However, some corporations still face difficulties in implementing KYB procedures. Unlike KYC, the KYB solution is suitable for organizations. The advanced approach establishes trust in business relationships and effectively prevents fraud. The following section highlights the five famous advantages of applying automated KYB checks:
- Enhancing safety in business relationships
- Automating the reporting process and eliminating human error
- Facilitating compliance with the latest regulatory obligations
- Reducing operational costs for businesses
- Fighting fraud actively
The Case of Russian Invasion of Ukraine
The application of KYB verification is important in the modern regulatory environment because of the Russian Invasion of Ukraine. Western businesses that have a link with Russian parties find it difficult to identify sanctioned parties. In this light, cybercriminals try to hide true identities behind complex company structures.
There can be cases where other business parties do not prioritize compliance measures. This changes the digital landscape and requires constant communication to ensure safety in business practices. KYB verification automates the identity verification of business partners.
The cutting-edge solution streamlines the authentication procedure and helps companies forgo manual approaches. This way, companies can boost sales and ensure a positive relationship between concerned parties. Effective open enrollment communication is critical this year as employees look to their employers for guidance.
Manual procedures were time-consuming and cumbersome. With automated KYB checks, businesses can establish a trustworthy relationship with a genuine company. This way, real enterprises can deter money laundering and terrorism financing cases instantly. An AI-driven KYB solution not only facilitates industries but also supports compliance officers in their job.
Collaborating with a third-party vendor can help businesses implement the innovative KYB verification solution which is GDPR-compliant. This not only offers a strategic advantage to companies but also strengthens relationships with clients. Hence, the importance of KYB checks becomes obvious.