What are KYC & KYB checks?

What is KYC?

KYC Meaning: When you’re looking to do business with a new customer or client, KYC checks - or Know Your Customer checks - are the essential checking processes that verify their identity.

What are the main steps involved in the KYC process?

Understanding the KYC process is key to protecting your business from financial crime and fostering trust with new clients. No matter your industry, these steps help form the backbone of your due diligence efforts:

• Customer Identification:
  The process begins with collecting basic details about your customer, for example full name, current address, date of birth, and how to contact them. Typically, you’ll ask for documents like a passport or driver’s licence to prove identity, along with a recent utility bill or bank statement to confirm their address.

• Customer Verification:
  Once you have the necessary documents, it’s time to confirm the information is genuine. This means double-checking the details against trusted and independent sources, such as government databases or credit reference agencies, to ensure the person is who they say they are.

• Risk Assessment:
  After verification, you’ll need to evaluate the level of risk the customer may present. This involves looking at factors like what kind of business they’re in, their transaction habits, their location, and any other red flags that suggest elevated risk (for example, involvement in high-cash industries). The idea is to spot potential connections to activities like money laundering or fraud before they become problems.

• Ongoing Monitoring:
  Completing the initial checks doesn’t mean the work is done. Regularly monitoring your customer’s activity helps you catch anything unusual or suspicious down the line. Staying vigilant ensures you can respond quickly if behaviour changes, maintaining compliance and peace of mind.

Establishing a thorough KYC process not only keeps your business compliant but also builds a foundation of trust in every new client relationship.

What is KYB?

KYB Meaning: KYB - or Know Your Business - follows the KYC process however, it refers specifically to completing checks on a business rather than an individual.

Implementing a KYC process or KYB process for any new business is the start of any robust AML checks and the duty of every business. 

Why is it crucial to have a KYB and KYC process?

Of course, it’s not enough to simply ask ‘what is KYC?’ or ‘what is KYB?’ - to understand its role we have to question why it’s so important for businesses.

The EU’s money laundering directives dictate that every business in the regulated sector must apply a risk-based approach to their anti-money laundering checks. KYC and KYB checks are a key component in this approach. 

If you need to implement a fast and accurate KYB & KYC process for your business, SmartSearch can help. Just read on to find out how.

How do KYC and KYB checks work?

Also known as customer due diligence – KYC and KYB checks effectively enable a company to verify the identity of a client or customer. To do this, the firm will need to obtain crucial details about the individual or business, to cross-reference against other reputable sources.

As you’d expect, the information required inevitably varies according to whether it’s an individual person or a business that’s being verified.

What’s the difference between KYC and KYB?

When it comes to KYC vs. KYB, the key difference is in the information needed to verify identity. If you’re carrying out KYC checks you’re verifying the identity of an individual, so you need access to details like their full name, date of birth and address. KYB checks on a business on the other hand will require documentation relating to their business.

What KYC checks involve

What is KYC checking? KYC checks are intended to verify the key aspects of the identity of an individual and the risk level that they pose, for instance, whether they are a PEP or politically exposed person. This usually involves checking details such as the individual’s full name, date of birth and address.

What KYB checks involve

What is KYB checking? KYB checks are intended to verify the existence of a business. To do this, you’ll need to check certain details which can include:

• Confirming the firm is registered with Companies House

• Identifying any persons with significant control and ultimate beneficial owners 

• Examining the company’s annual returns and statements

• Confirming their registered address 

• Ascertaining their business registration or licence 

How do KYC and KYB checks help with compliance?

These checks help you to assess the suitability of an individual or business – prior to the official onboarding process. KYC and KYB checks will also identify any politically exposed persons, persons of significant control, or ultimate beneficial owners – all of which would be classed as high risk customers. 

If you do decide to go into business with a client or customer that poses a greater risk, you’ll need to adjust their approach in line with this. That might mean performing enhanced due diligence, or having more comprehensive ongoing monitoring, to keep tabs on any change in status.

Why is ongoing monitoring necessary in KYC, and what does it involve?

Ongoing monitoring is a vital part of the KYC process, ensuring that customer relationships remain transparent and compliant well beyond initial onboarding. Once an individual or business customer is verified, it’s essential to keep an eye on their transactions and behaviour over time. This helps spot any unusual or potentially suspicious activity that could point to financial crime, money laundering, or even fraud.

What does ongoing monitoring involve? In practice, it means regularly reviewing customer transactions for anything that stands out, such as sudden large transfers, changes in account usage, or patterns that don’t match their profile. If, for example, a client who usually sends modest payments suddenly begins moving large sums overseas, that’s a clear signal for a closer look.

This process isn't static. As regulations evolve or new risks emerge, your monitoring measures should adapt accordingly. By maintaining continuous oversight, you not only meet regulatory obligations but also protect your business from becoming a vehicle for illicit activities.

Regular reviews, ongoing risk assessments, and automated alerts are key tools in effective ongoing monitoring. These measures collectively ensure that you’re not just ticking a box, but actively safeguarding your business and customers from financial crime.

How do KYB and KYC checks assist with AML?

AML - or anti-money laundering - is the duty of any firm doing business with other businesses or individuals. KYC checks are one of the key ways that you can play your part in keeping money laundering at bay and avoid becoming susceptible to criminals using your business to ‘wash’ illegal funds. 

The best way to start your AML strategy is to implement a robust KYB and KYC process for any new business. 

SmartSearch can help

Now that you better understand the answers to ‘what is KYC?’ and ‘what is KYB?’, the next question to answer is: how can you make your KYC and KYB process watertight, accurate and fast?

Many regulated businesses perform KYC and KYB checks manually, by requesting physical copies of ID documents, such as passports and driving licences, then cross-referencing these details against sanctions and PEP lists.

However, this traditional approach can be both time-consuming and resource-intensive. Manually collecting and updating customer data often leads to errors or overlooked discrepancies, which can leave businesses exposed to fraud, non-compliance, or outdated information. As customer details change over time, relying on paper-based or manual systems increases the risk of data becoming obsolete, potentially resulting in ineffective risk assessments and even regulatory breaches.

Using an automated system from a reputable KYC provider is not only quicker, but also more reliable, as there’s no margin for human error as with manual checks, and no stone is left unturned.

Fast and accurate KYB and KYC checks at your fingertips

At SmartSearch, we perform automated KYC and KYB checks using the Dow Jones Watchlist– an international database made up of over 1,100 lists worldwide. This database contains extensive profiles on both individuals and businesses, which are updated every day for maximum accuracy.

In fact, our full-service electronic AML platform cross-references the details provided against multiple data sources, including Companies House, Experian, TransUnion and Equifax, as well as Dow Jones PEP and sanctions lists. This system enables us to provide a pass or fail result for the identification of an individual or business, within a few seconds.