Glossary term
Know Your Business (KYB)
Subject: Financial Crime, Customer Due Diligence and Correspondent Banking
Also known as: Business customer due diligence, Corporate KYC
Know Your Business is the due diligence process for company and other organisational customers, confirming that the entity exists, who owns and controls it, and what it actually does.
Explanation
KYC for a person starts with identity documents. A business is harder, because the entity is a legal construct and the real people sit behind it. KYB therefore covers registration details, legal form, address, directors, authorised signatories, the nature of the trade and, above all, the beneficial owners. Teams check registry extracts, constitutional documents, financial statements and sometimes the premises or website. They also look at the countries, customers and suppliers the business deals with. Complex or foreign structures lead to more work, and a company with no visible activity raises concerns about a shell company. Many firms use KYB as a label for the workflow and software that handle this, particularly in fintech and payments. A front company with a tidy certificate and a rented address passes for a real trader when no one looks past the paperwork.
Example
A payments company receives an application from an import business that says it sells furniture. The analyst obtains the company registry extract, finds two directors and a corporate shareholder, and traces that shareholder to an individual with 60% control. The business has been registered for two weeks and has no website, so the case goes to enhanced review.
Not to be confused with
- Know Your Customer (KYC)
- KYC is the general term for customer checks. KYB is the version designed for company and organisational customers.