Navigating regulatory waters: The key to efficient KYB

Learn how businesses can navigate evolving regulations while upholding ethics and efficiency.

By Alastair Bulger • 3 min read

In the highly regulated realm of finance, businesses face a continuous challenge: staying compliant with ever-evolving regulations while maintaining operational efficiency and ethical behaviour. While Know Your Customer (KYC) has been the cornerstone of financial institutions' due diligence for years, a critical sub-discipline has emerged on the scene - Know Your Business (KYB). KYB, designed to validate the legitimacy of companies and prevent financial crimes like money laundering, or the financing of crime or terrorism, is now widely recognised as a compliance discipline in its own right across various sectors, especially for those companies who have to record why they made these decisions.

The KYB revolution

KYB, often understood as an extension of KYC, gained prominence due to glaring vulnerabilities in business verification. While KYC practices have been entrenched and understood for decades, KYB addressed a critical gap that allowed bad actors to exploit corporate entities to disguise illicit activities. Europe formalised their KYB regulations in the 4th Anti-Money Laundering (AML) Directive of 2017, followed by the United States incorporating KYB rules into its Customer Due Diligence Requirements for Financial Institutions. This transformative development has unveiled in a new era of due diligence, positioning KYB at the forefront of regulatory compliance.

KYB's reach beyond boundaries

The significance and impact of KYB extends beyond specific industries, encompassing entities such as credit institutions, auditors, cryptocurrency platforms, and even estate agents and conveyancers. This broad applicability underscores KYB's universal relevance, making it crucial for businesses.

Demystifying KYB Processes: A Regulatory Dance

As established, KYB processes are vital for regulated businesses seeking to maintain compliance with their regulatory requirements. So what does it entail? Typically, we see that KYB involves:

  • Business Verification: Confirming the legal entity's status and accurate business information, including names and addresses.
  • Document Verification: Reviewing essential documents like incorporation certificates and licenses.
  • Ultimate Beneficial Owner (UBO) Identification: Identifying and verifying individuals who ultimately own or control the business.
  • Sanctions and PEP Screening: Screening against sanctions lists and identifying politically exposed persons (PEPs), for both UBOs and relevant business entities.
  • Risk Assessment: Profiling relationships based on risk factors and conducting enhanced due diligence for higher-risk cases.
  • Ongoing Monitoring: Continuous or episodic checking for changes in ownership or adverse information.
  • Record Keeping: Maintaining thorough records of the KYB process and activities.
  • Reporting and Compliance Documentation: Preparing reports for regulatory authorities and creating compliance documentation.

These KYB sub-processes not only safeguard against engaging with illicit entities but also underscore a commitment to ethical business practices. Robust KYB is an invaluable asset for all businesses anticipating audits.

Embracing KYB compliance excellence

In today's evolving regulatory landscape, KYB has emerged as a critical aspect of business verification and risk management. It is essential for safeguarding against financial crimes, enhancing due diligence, and upholding regulatory compliance. KYB compliance signifies a proactive commitment to transparency and adherence to regulations; and ensures that financial institutions – and other regulated businesses – are prepared for any AML audit.

How Sikoia can elevate your KYB process

At Sikoia, we understand the complexities and demands of modern KYB compliance. Our Unified Data Platform is your gateway to a simplified and efficient Know Your Business (KYB) process. With it, you can seamlessly navigate the intricacies of customer onboarding and due diligence, all within one comprehensive platform.

Take the first step towards KYB excellence - book a demo or try our dashboard for free.


Alastair Bulger

Co-Founder & CCO, UK

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