KYB

What is KYB?

Know Your Business (KYB) is a regulatory process used by financial institutions and other regulated entities to verify the identity and legitimacy of corporate clients. KYB involves the collection and analysis of detailed information about a business, including its registration documents, ownership structure, key personnel, and financial records. The goal is to ensure that the business is legitimate, compliant with relevant laws, and not involved in illegal activities such as money laundering, fraud, or terrorism financing. KYB procedures are similar to Know Your Customer (KYC) processes but are tailored for business entities rather than individual clients. By conducting thorough KYB checks, organizations can mitigate risks, maintain regulatory compliance, and protect the integrity of the financial system.

The KYB process typically involves collecting and analyzing official business documentation such as the certificate of incorporation, business registration numbers, articles of association, proof of address, and licenses. It also requires identification of the company’s directors, shareholders, and ultimate beneficial owners (UBOs), particularly those holding a significant percentage of ownership or control. In some jurisdictions, enhanced due diligence (EDD) measures may apply when dealing with high-risk industries, newly incorporated entities, shell companies, or clients from sanctioned or high-risk jurisdictions.

KYB procedures often include screening businesses and their principals against global watchlists, sanctions databases, politically exposed persons (PEP) lists, and adverse media sources. These checks are essential to evaluate a company’s risk profile and ensure compliance with Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) obligations.

In the cryptocurrency and fintech sectors, KYB is especially important due to the pseudonymous nature of transactions and the potential for misuse of digital asset infrastructure. Many crypto payment gateways and exchanges implement KYB as part of their onboarding workflow, supported by automated verification tools and risk-scoring algorithms. Ultimately, robust KYB programs contribute to the transparency and stability of the financial ecosystem by allowing service providers to identify and mitigate risks, fulfill legal obligations, and foster trust among clients, regulators, and stakeholders.