The Know Your Company (KYB) process considerably shortens your customer entry process in your collaborations. It is a complicated and long process to carry out the controls and document tracking by manually accessing certain information about the companies. It can cause you to take the wrong action as it creates a waste of time and has a high probability of error. Especially in the developing digitalization world, although financial criminals have expanded the types of crimes and introduced new risks, the regulators have started to increase the regulations by adapting to this process. Regulators announce new measures in the face of ever-increasing crimes such as money laundering and terrorist financing, smuggling, and fraud. KYB requires the collection and analysis of data from other companies. These data are; registration documents, including the company's address, license documents, and the identities of directors and owners. KYB processes accelerated customer onboarding processes, greatly reduced the manual workload, made it highly secure against financial risks, and avoided penalties.
UBO and KYB
The Know Your Business process is the process where you question the legal legitimacy of the companies that will become your customers or cooperate with. The most important point of KYB is to be able to verify the Ultimate Beneficiary (UBO). UBO defines the legal personality of the beneficiary of a company. It can also be considered those who have at least a 25% share in the capital of the legal person. With the increase in crime, banks, insurance, and other financial companies are now obliged to identify the UBOs they work with. Institutions such as the FATF and the EU have agreed that UBOs are a risky phenomenon in preventing money laundering and terrorist financing.KYB verification is to create extra competencies and pressures on all regulated businesses; these regulated companies need an advanced due diligence process to identify Businesses and UBOs.
In order to carry out the EDD process, additional detailed information about the Customer is needed. Because with this additional data, you can determine the source of the funds coming to the companies, advance monitoring of transactions, and monitor and report suspicious activities. At the same time, EDD is important to understand whether your Customer is genuine.
After the UBOs are detected, you can verify the contacts with the KYC process.
KYC and KYB
CDD customer due diligence has been made mandatory for regulated industries in the compliance regulations for Money Laundering and Terrorist Financing. In the past years, it has been noticed that there are vulnerabilities in the KYC compliance process in the USA. It was declared to have these loopholes when the US Patriot Act was declared, and only in 2016 did it become clear that the KYB was needed. As the system progresses, company and personal networks also reach wide areas. Previously, with KYC, customers were able to verify their identities while doing due diligence while assessing their risk factors. However, KYC was insufficient to identify and verify the stakeholders and beneficiaries of the institutions and organizations that cooperated and served, and KYB was needed. Because the possibility of these seemingly legitimate organizations being criminal, wealthy, or a front is quite possible, especially today, for this, KYB beneficiaries verify the stakeholders, namely the UBOs, while at the same time scanning the companies. The KYB process is no different than the KYC process. The difference between them varies in the definition of the Customer. While the KYC process is defined on behalf of customers to even a company, the KYB process defines the responsible or legal representative.
EDD, CDD, and KYB
Customer due diligence is a sub-form of KYB as Know Your Customer. Customer due diligence is the process used by financial institutions to collect and evaluate relevant information about potential customers. Here, it aims to reveal the potential risks of cooperating with the organization or person. Especially B2B companies need due diligence to define the institutions and organizations they will cooperate with. In this way, it can fight financial crimes such as money laundering in a healthier way.
On the other hand, companies provide secure work to companies with which they have business relations. Customer due diligence is a mandatory step of regulatory compliance processes. Thanks to Customer due diligence, you can control your customers, including institutions and individuals, in the background and take action by identifying risks.
Enhanced due diligence is the process that enables further risk investigation. Designed to manage high-risk clients and large transactions.CDD procedures sometimes fail to detect large-risk transactions where the need for EDD arises. The EDD process is especially needed if companies are to cooperate with Shell companies, companies in high-risk industries such as gambling companies, any company located in a high-risk third country, or companies that finance terrorist activities and are blacklisted.
How Sanction Scanner Supports These Processes
Sanction Scanner Know Your Business Solution allows you to get a flawless business relationship no matter how complex obligations are and reach great prestige and long-lived relationships with your customers without fraud or non-compliance.
In addition, Comprehensive Risk Assessment controls your Compliance Process to defend your business against fraudulent entities and activities. By performing the UBO check-in milliseconds, you can determine the companies' shareholders, directors, or owners. Then you can check the Aml compatibility by scanning the Sanction Scanner's data on more than 3000 Sanction Lists, PEP Classes, and Adverse Media data in more than 220 countries.
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