Know your customer (KYC) and know your business (KYB) are the checks that a firm carries out in order to verify the identity of potential clients and customers.
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.
How do KYC and KYB checks help with compliance?
These checks help firms 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 a firm does decide to go into business with a client or customer that poses a greater risk, they’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.
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 & 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.
Meanwhile, KYB checks verify the existence of a business. To do this, you’ll need to confirm that the firm is registered with Companies House, and identify any persons with significant control, as well as ultimate beneficial owners. You may also need to examine the company’s annual returns and statements.
SmartSearch Can Help
Many regulated businesses perform KYC and KYB checks manually, by requesting physical copies of ID documents, such as passports and driving licenses, then cross-referencing these details against sanctions and PEP lists.
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.
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, 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.