Know Your Business (KYB) refers to the process of verifying the identity, ownership structure, and legitimacy of corporate clients before providing them with financial or professional services. While Know Your Customer (KYC) focuses on individuals, KYB is designed to assess businesses, including their beneficial owners, directors, and sources of wealth.

For financial institutions, FinTech's, and payment service providers, KYB is a core requirement under anti-money laundering (AML) regulations. Regulators expect firms to understand who they are doing business with, identify potential risks, and prevent bad actors from exploiting the financial system for money laundering, terrorist financing, or fraud.

KYB has gained greater importance in recent years as regulators worldwide increase scrutiny of shell companies, opaque ownership structures, and cross-border financial activity. Without robust KYB, firms risk regulatory fines, reputational damage, and exposure to financial crime.

Definition Of Know Your Business (KYB)

Know Your Business (KYB) is the due diligence process applied by regulated entities to verify the ownership, governance, and legitimacy of corporate clients, with the goal of preventing financial crime and ensuring compliance with AML regulations.

KYB procedures typically involve:

• Identifying the Ultimate Beneficial Owners (UBOs) of the business.

• Collecting and verifying company registration details.

• Screening directors and owners against sanctions and PEP lists.

• Assessing the company’s sector, geography, and risk profile.

• Evaluating the business’s financial behaviour and transaction patterns.

By combining documentation checks with automated screening solutions, KYB provides institutions with assurance that their business relationships are transparent and compliant.

The KYB Process In Practice

The KYB process is not a single check but a structured workflow that begins at onboarding and continues throughout the business relationship. It ensures that every business client is properly verified, ownership structures are transparent, and risks are monitored continuously. While the depth of checks depends on jurisdiction and business type, most firms follow similar steps.

Business Identity Verification

Regulated firms collect official registration documents such as certificates of incorporation, business licences, and tax identification numbers. This establishes the legal existence of the business.

Beneficial Ownership Checks

KYB extends beyond corporate paperwork by identifying the natural persons who ultimately own or control the company. These individuals are assessed for AML risks, sanctions exposure, or political influence.

Director And Shareholder Screening

Directors and significant shareholders are screened against global sanctions lists, adverse media reports, and politically exposed persons databases.

Risk Assessment

Firms evaluate the risk level of the business relationship based on factors such as industry (e.g., high-risk sectors like crypto exchanges), geography (e.g., high-risk jurisdictions), and transaction behaviour.

Ongoing Monitoring

KYB does not end after onboarding. Continuous screening and monitoring ensure that changes in ownership, regulation, or reputation are detected in real time. Tools such as Know Your Business automate this process, reducing manual workload and increasing accuracy.

Why KYB Is Essential For AML Compliance

KYB plays a critical role in protecting financial systems from misuse. By ensuring transparency of ownership and control, institutions can identify risks early and prevent exposure to illicit activity. Regulators consistently highlight KYB as a cornerstone of AML and counter-terrorist financing measures.

Preventing Shell Company Abuse

KYB helps identify shell companies used to obscure beneficial ownership and facilitate money laundering.

Supporting Sanctions Compliance

By screening owners and directors against sanctions lists, KYB ensures firms do not inadvertently provide services to sanctioned entities.

Reducing Fraud And Reputational Risk

KYB protects institutions from onboarding fraudulent businesses or high-risk entities that could expose them to regulatory and reputational harm.

The Financial Action Task Force (FATF) stresses the importance of transparency in beneficial ownership, requiring jurisdictions to implement frameworks that prevent the misuse of legal persons for financial crime.

Regulatory Requirements For KYB

KYB requirements are embedded in AML laws across jurisdictions. While specific rules differ, the global direction is clear: regulators expect firms to identify and verify beneficial owners, directors, and shareholders to ensure transparency.

• European Union: The 5th and 6th Anti-Money Laundering Directives (AMLD5/AMLD6) explicitly require firms to identify beneficial owners and ensure company ownership transparency.

• United Kingdom: Under the Money Laundering Regulations, regulated entities must verify beneficial ownership through the Companies House register and enhanced due diligence measures.

• United States: The Corporate Transparency Act (2021) mandates reporting of beneficial ownership to FinCEN, which strengthens KYB requirements for financial institutions.

The IMF also highlights that strengthening beneficial ownership frameworks is key to improving financial transparency globally.

Key Challenges In KYB

Although KYB is essential, firms face practical challenges when implementing it effectively. Data is often inconsistent across jurisdictions, ownership structures are deliberately obscured, and compliance teams struggle with large volumes of screening alerts.

Data Fragmentation

Beneficial ownership data is often spread across jurisdictions, with varying levels of transparency and accessibility.

False Positives

Screening large datasets for sanctions or PEP matches can produce high false positive rates, overwhelming compliance teams. Solutions like FacctList (for watchlist management) help refine matching and improve accuracy.

Rapidly Changing Structures

Businesses can change directors, shareholders, or jurisdictions quickly, making real-time monitoring essential.

Cross-Border Complexity

Multinational corporations may involve multiple jurisdictions, making it difficult to establish a single, clear picture of ownership.

Best Practices For Effective KYB

To overcome challenges and meet regulatory standards, firms should adopt structured best practices in KYB. This ensures not only compliance but also operational efficiency and stronger fraud prevention.

• Automate Screening: Use platforms such as FacctView (for customer screening) and Know Your Business to streamline beneficial ownership checks.

• Adopt A Risk-Based Approach: Apply enhanced due diligence for high-risk entities while using simplified checks for low-risk ones.

• Leverage Authoritative Sources: Cross-reference beneficial ownership data with government and regulatory databases.

• Ensure Ongoing Monitoring: KYB is not a one-time exercise; continuous monitoring is vital to remain compliant.

• Embed Audit Trails: Maintain detailed records of KYB checks for regulatory reporting and investigations.

The Future Of KYB

The future of KYB lies in greater transparency, automation, and regulatory cooperation. As global efforts to combat money laundering intensify, institutions will be expected to enhance their KYB processes even further.

• Greater integration with digital identity wallets for businesses.

• Use of machine learning to improve entity resolution and reduce false positives.

• Closer collaboration between regulators and financial institutions on global ownership databases.

• Expansion of SupTech tools to monitor corporate ownership changes in real time.

As financial crime becomes more sophisticated, KYB will remain central to compliance frameworks, bridging the gap between corporate transparency and financial system integrity.