As a compliance officer, it is your responsibility to ensure that your organisation is complying with all applicable regulations and laws. One key aspect of this is conducting thorough Know Your Business (KYB) checks.
KYB checks help to verify the identity of your business partners, and to ensure that you are not inadvertently doing business with individuals or organisations involved in criminal activity.
In this article, we discuss the importance of KYB and take a look at the information that is typically required for conducting a compliant check.
Why KYB checks are important
KYB checks are an essential part of any compliance program as they help to mitigate risks associated with money laundering, terrorism financing, and other types of financial crime. KYB checks allow you to confirm the identity of the businesses you are dealing with, ensuring that you are not inadvertently doing business with entities that are involved in criminal activity.
Know your Business is a crucial instrument in the fight against organised financial crime. It is a way to verify that the business you are dealing with, is legal and that they will not misuse your finances or the relationship you have.
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Additionally, conducting KYB checks can help you to identify potential risks associated with your business partners, such as a history of fraud or other financial crimes.
What information is needed for a KYB check?
The KYB process involves collecting and reviewing data that provides information about the business, its owners, and its financial activities. Here is some of the information that may be required for a KYB check.
Business registration information
At the start of any KYB check is information about a business’ registration. This will often include information about the structure of the business, its location, it’s shareholders and directors, and the nature of its operations. Often, this can include the certificate of incorporation, business licence, and any other relevant permits and certificates.
Articles of association
Articles of association is another set of important information that may be required for a KYB check. These outline the rules and regulations governing the business, including its purpose, how it will operate, structure, and ownership details.
Identification documents for business owners and shareholders
KYB checks may require additional identification documents from business owners, directors, and other key personnel. These documents may include passports, driving licences, and other government-issued identification cards. These documents are essential in verifying the identities of the people associated with the business.
Financial information
Financial statements and information on a company’s accounts can provide insights into the financial health of the business. This insight can help compliance teams to evaluate the stability of the business.
Business contracts and agreements
Finally, certain KYB checks may also require copies of the business’ contracts and agreements with its customers, suppliers, and other partners. These documents provide information about the nature of the business’ operations, its relationships with other businesses, and the risks associated with its activities.
5 tips for conducting KYB checks
To conduct effective KYB checks, there are several best practices that you should follow:
Start with the basics: When conducting KYB checks, it is important to begin with the basics. This means verifying the legal name of the business, its physical address, and any other relevant identifying information. This can be done by reviewing official documents such as business licences, registries, and other government records such as Companies House.
Use reliable data sources: It is important to use reliable data sources when conducting KYB checks. This means using reputable databases and information sources, such as government registries, to verify the information provided by the business.
Review Ultimate Beneficial Ownership: One important aspect of KYB checks is verifying the ultimate beneficial ownership of the business. This means identifying the individuals or entities that ultimately control the business, and ensuring that they are not involved in criminal activity.
Consider industry-specific risks: When conducting KYB checks, it is important to consider any industry-specific risks associated with the business. For example, if you are dealing with a business in the financial sector, you may need to conduct additional checks to ensure that they are not involved in money laundering or other financial crimes.
Monitor for changes: Finally, it is important to monitor your business partners on an ongoing basis for any changes that may affect their risk profile. This means regularly reviewing their information and conducting additional checks as needed to ensure that they remain in compliance with relevant regulations.
