Finding reliable data is essential for effective Know Your Business (KYB) processes to ensure you collaborate with companies you know everything about. Access to accurate information ensures you know all about the ultimate beneficial owners, suspicious financial transactions, the company's reputation, hidden shell companies, and more.
This guide explores the types of KYB data that you need and key data points that enhance business verification, helping you choose the right data sources to verify legitimate businesses.
What is Know Your Business (KYB)?
Know Your Business (KYB) involves verifying the legitimacy and credentials of companies. It’s a direct counterpart of KYC, which does the same, only for individuals. Know Your Business is crucial for organizations that want to ensure that their business partners, vendors, or clients comply with regulations and are not engaged in illegal activities like money laundering, fraud, or financing of terrorism, among other things.
This is particularly important for industries with strict regulatory frameworks, such as banking, financial services, and payment processing, where businesses must comply with Anti-Money Laundering (AML) regulations and reduce exposure to other financial risks.
Types of KYB data: what to look for in a provider?
Choosing a Know Your Business data provider is a critical decision for businesses that need to verify their corporate customers and partners. The accuracy and coverage of the data provided can make or break your KYB process.
There are several types of KYB procedures to check for when evaluating a provider, ensuring that they cover all necessary compliance checks.
1. Business registration information
One of the primary types of data to verify is whether a business is registered with the appropriate governmental body and its operational status. Business registration information should include the company’s legal name, registration number, founding date, industry, and more.
A reliable KYB data provider will have access to official business registries and databases, providing fresh and accurate company data to confirm its legitimacy and existence.
2. Ownership and beneficial owners
Identifying the ultimate beneficial owners (UBOs) of a company is a critical component of the KYB process. Many businesses have complex ownership structures, and it could be confusing to discover the identity of the true individuals who own or control the company.
You should conduct KYB checks to get an overview of detailed ownership information, including the names, percentages of ownership, and other relevant stakeholders' details. This data helps to identify potential risks such as conflicts of interest, money laundering, shell companies, or sanction violations linked to hidden ownership.
3. Financial data
Understanding a company’s financial standing is essential for assessing its stability and long-term viability. Financial data, including balance sheets, income statements, and cash flow reports, provide insight into a company’s performance and overall financial health.
4. Licensing documentation and compliance information
In many industries, businesses are required to hold specific licenses or comply with regulations to operate. A good KYB data provider will provide access to information about relevant certifications, licenses, and regulatory compliance status.
This helps ensure that the company you are doing business with adheres to industry standards and regulatory requirements, reducing the risk of non-compliance penalties or potential legal issues.
5. Adverse media and sanctions screening
Adverse media coverage checks and sanctions screening are critical for identifying potential reputational and legal risks. These checks search for negative news or associations with illegal activities involving the business or its owners.
Sanctions screening ensures the business is not associated with any individuals or entities, such as those maintained by the Financial Crimes Enforcement Network (FCEN), which could lead to severe penalties or legal consequences if violated.
6. Politically Exposed Persons (PEPs)
If a business or its owners are connected to Politically Exposed Persons (PEPs), this can indicate an elevated risk of corruption or illicit activities. KYB providers should offer PEP screening to identify if any of the beneficial owners or key individuals within the company are politically exposed.
Essential KYB data points for accurate business verification
Probably the best data source for business verification is Coresignal. It provides a deeper understanding of a business entity that enhances KYB processes with the help of company and employee data. It helps businesses verify and assess important information. Coresignal's data allows for ongoing monitoring of suspicious activity, business profits, and enables enhanced due diligence.
Here are several data points you could leverage:
- Firmographics. Run quick business checks by basic company details like name, location, industry, and core business activities.
- Financial data. Check the company's balance sheets, income statements, and cash flow to establish an understanding of business financial operations.
- Data on key executives and decision-makers. Information on C-level executives, founders, board members, job titles, ultimate beneficial ownership, and career histories to assess who controls the company.
- Workforce data. Insights into employee count, hiring trends, employee tenure, and turnover rates to check business stability and growth.
- Organizational structure. Breakdown of departments and individual roles to understand the company’s complexity and key departments.
These data points provide a comprehensive view of business risks, operations, leadership, and stability, ensuring an accurate KYB process based on fresh data.
Know Your Business (KYB) use cases
KYB verification has a wide range of use cases across different industries. Here are some common KYB use cases.
Financial institutions
For banks and financial institutions, KYB procedures are a core part of their Anti-Money Laundering compliance processes. Financial institutions need to ensure that they are not facilitating transactions for businesses involved in money laundering, fraud, or other criminal operations.
KYB checks provide the necessary business verification data to prevent money laundering, sustain brand integrity, and catch potential criminal activities in regulated industries.
Payment processors
Payment processors are responsible for verifying the businesses they handle transactions for. KYB compliance checks help payment processors confirm that their clients are legitimate, reducing the risk of fraudulent activity and protecting the integrity of the payment ecosystem.
By performing thorough business verification, payment processors can avoid legal and financial risk, resulting from handling transactions for unreliable businesses.
B2B platforms
In the B2B industry, KYB procedures are used to assess the legitimacy and reliability of potential business relationships, clients, or suppliers. Businesses need to verify the credibility to minimize the risk of working with financially unstable or non-compliant businesses.
KYB checks also help B2B companies maintain trust and transparency, ensuring that they only work with reliable and legitimate partners.
Investors and venture capitalists
Automated or manual KYB checks are an essential tool for investors and venture capitalists conducting due diligence before investing in a company. By verifying the business’s financial health, ownership structure, and compliance with regulations, investors can better assess the risks and potential returns associated with their investment. This process also helps investors avoid putting their money into a fraudulent or poorly managed business relationship.
KYB vs. KYC: what's the difference?
Although both KYB and KYC are focused on verification processes to reduce risks and ensure compliance, they differ in their target.
KYB (Know Your Business)
KYB regulations focus on verifying businesses and ensuring they meet regulatory standards. It involves checking the company registration, ownership structure, financial stability, and compliance with regulations.
KYB compliance is typically used in B2B contexts, where business entities need to ensure that their partners, suppliers, or clients are legitimate and reliable.
KYC (Know Your Customer)
KYC, on the other hand, is focused on verifying individual customers. This process is widely used by banks, financial institutions, and online platforms to verify customer's identity and prevent financial crimes such as fraud, money laundering, or identity theft.
KYC involves collecting and verifying personal information, such as identity documents, proof of address, and financial information, to confirm that the customer is who they claim to be.
Choosing the right KYB data provider
Choosing the right KYB data provider is crucial for ensuring that your company verification and KYB compliance processes are effective, efficient, and compliant with the necessary regulations. Here are some key factors to consider when selecting a KYB data provider.
Data accuracy
The accuracy of the data provided is one of the most important factors to consider. Inaccurate or outdated data can lead to incorrect business assessments and increase the risk of partnering with a non-compliant entity. Make sure that your KYB data provider offers regularly updated, reliable data from trustworthy sources.
Global coverage
If your business operates internationally, you’ll need a KYB provider with access to global data. This ensures that you can verify businesses across the globe and meet the specific regulatory requirements of each region. Look for a provider that offers comprehensive global coverage to handle your international business verification needs.
Integration and scalability
A good KYB provider should offer APIs and tools that can be easily integrated into your existing systems, enabling you to automate and streamline your business verification processes. Additionally, the provider should offer scalable solutions that can grow alongside your business as your verification needs increase.
Compliance
KYB compliance means ensuring that the provider is in line with key regulations, such as GDPR, CCPA, and other regional compliance frameworks. KYB compliance will help your business stay on the right side of the law and avoid fines or penalties related to non-compliance.
Customer support
Reliable customer support is essential for resolving issues and ensuring successful KYB checks. A provider with strong customer service can assist you in dealing with complex verifications, troubleshooting technical problems, or understanding regulatory changes.
By choosing the right KYB data provider, you can safeguard your business from financial and reputational risks while ensuring compliance with the necessary regulatory standards.
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