Know your business procedures are derivatives of KYC compliance but have a slight difference in their functioning. KYC was truly based on identifying the customers’ identity whereas KYB checks are used to determine the real identity of the businesses and to authenticate their documents. This also helps to protect the B2B relationships among the companies. Therefore these checks are important for the business to make them trustworthy. An increasing number of identity thefts and financial frauds are making it difficult for the companies and damaging their repute. By employing know your business service and AML regulation the companies can assess the potential risk companies possess and also determine their involvement in any suspicious activities.
What are Digital KYB solutions?
Every legitimate company and most importantly fintech firm is obliged to incorporate a know your business KYB solution and know your customer (KYC) compliance every time they tend to deal with new customers, regardless of its individual entity or some sort of business. Such solutions aid the corporations to identify the real identities of the businesses before establishing B2B relationships
Know your business processes use AML screening service which helps out the firms to secure B2B relationships and also require the corporates to assess whether the clients’ are authentic. . Moreover, it can accurately determine the presence of the businesses entities such as ultimate beneficial owners (UBOs), stakeholders, and higher management in any sort of suspicious activities. This is all done through KYB checks, which provide the company brief details before developing collaborations.
Difficulties to employ Business Verification Services
- So far, the utmost challenge the companies are facing to incorporate the KYB laws is to acquire ultimate beneficial ownership of personal information, mainly in such cases where there is no jurisdiction available to give access of companies to the companies for verification. In addition, the insufficient information regarding the stakeholders generates various challenges to determine their transaction activities as well as the authentication of identities.
- The firms tend to face problems in getting the information regarding their clients in the proper format. As the organizational structures and management change with time, it’s hard to keep a record of them, which is another problem. Many of the firms lack effective data management.
- Most businesses have adopted KYC procedures yet have ample space for enhancing them which requires a lot of funds.
Benefits of Digital Know Your Business
Secures B2B Relationships
Business relationships rely on mutual understanding and common interests. Businesses that establish relationships with other companies seem to be trustworthy, but they tend to have different priorities that can cause problems. Moreover, corporate partners have no information regarding the third-party vendors of the affiliated firm. There is always the utmost need of verifying the businesses to build secure and long-lasting B2B relationships. Therefore, the role of KYB checks is viable, as these standards are the only source of establishing a protected communication channel.
Corporate verification solution provides the verification procedures and a new sense of authenticating the business operation. Due to this, the sales are increased and interest is enhanced between the business partners. In addition to credibility, the security concerns are of the same significance. Hence the businesses are obliged to incorporate such procedures into their system to boost up their security measures by providing proper checks to identify the UBOs, owners, and stakeholders of the partner firms.
Reduces Business Operational Cost
With the technology boom, businesses have become aware of the benefits of automated systems. Therefore, digital businesses have started to employ technology-driven systems in place of human resources which cuts down the labor cost and also maximizes productivity. It’s pretty much noticeable that the automated services are more efficient as well as less prone to errors which makes them productive and considered as the gateway to eliminate errors generated due to human intervention. The corporate operation requires utmost security. The loophole among them delays the normal functioning which compromises the sales. By adopting KYB automated services the business can reduce such happenings.
Compliance with AML
With the spike in financial and identity frauds, it was made mandatory for the business to implement regulations established by the lawmaking authorities like BSA and FATF. This compliance provides the defense line for the companies to stop drug dealings, money laundering, and counter-terror financing. The banks are obliged to report the customer’s details to the authorities if they tend to make transactions of more than $10,000 under the financial policy established by BSA. AML standards are also set up to diminish money laundering activities.
AML is also a good source to verify the company as well as to protect its interests. Unfortunately, the firms with non-compliance lead the road towards financial loss, and in worse cases, they can face permanent bans. Annually $5 million is collected by the regulatory authorities from the business which have been lazy in adopting mandatory KYC compliance.
Know your business compliance is playing a magnificent role in securing the business relationships as well as protecting their mutual interests. SaaS providers have come up with KYB verification solutions that allow businesses to identify the true identities of customers.