KYB

KYB, or Know Your Business, is a due diligence process used by financial institutions and other regulated entities to verify the legal identity and legitimacy of a business entity before establishing a relationship and on an ongoing basis. The objective is to prevent financial crime, including money laundering, terrorist financing, and sanctions violations, by ensuring that the business exists, is properly registered, and is acting in a legitimate manner.

Typical information collected includes legal entity name, registered address, country of incorporation, registration number, tax identification number, ownership and control structure, list of directors or ultimate beneficial owners (UBOs) who own a threshold stake (commonly 25% or more), business activities, source of funds, and regulatory licenses. Documents may include corporate registry extracts, certificate of incorporation, recent financial statements, proof of address, and license certificates. Verification methods include document validation, identity verification of key individuals, and third-party checks like sanctions lists and adverse media.

KYB is often conducted as part of customer due diligence (CDD) and is complemented by ongoing monitoring and periodic reviews, especially for high-risk entities. It is governed by anti-money laundering (AML) and counter-terrorist financing (CTF) regulations, guided by FATF standards and jurisdictional laws; requirements vary by country and sector. Differences from KYC: KYC focuses on individuals; KYB focuses on legal entities; both require risk assessment and ongoing monitoring.

Impact: used by banks, payment processors, fintechs, and other regulated entities; can involve beneficial ownership transparency and risk-based approaches; privacy and data protection considerations apply when handling corporate data.