Businesses that opt to enter corporate partnerships need to be sure with whom they are choosing to build long-term relationships. With fraud on the rise, enterprises are facing a surge in shell companies stepping forward for collaboration. Considering this, commercial businesses faced around £84 million worth of losses to illicit partnerships in 2021.
Enterprises should be aware of suspicious company details, legitimacy issues, and other red flags pointing toward fraud. Therefore, know your business services provides a clear picture of the firm’s status with accurate validation of all their details. This further helps companies stay put with KYC/AML regulatory standards.
This article discusses the importance of KYB checks and how they benefit companies in building secure corporate relationships.
A Walkthrough of the Know Your Business (KYB) Concept
The concept of the KYB checks refers to practices involving company verification, screening of their backgrounds, employees’ identification, and Ultimate Beneficial Owners (UBOs) authentication. These checks are put into place to identify and reduce threats of money laundering, financial loss, reputation damage, or other consequences. Furthermore, regulatory bodies have made KYB solutions to ensure secure corporate partnerships.
With an increase in creation of shell companies, global watchdogs put a strong emphasis on the integration of efficient KYB services. They mandate enterprises to develop effective fraud prevention measures and safeguard the global economy from fallouts.
KYB checks comprise the following steps that every business needs to adhere to:
- Collection of the company’s complete information, including registration, financial records, employee details, and UBO insights.
- Identifying companies’ corporate structure through checking services they offer and individuals who benefit from profits.
- Authentication of documents that a company submits by analyzing them across corporate registers, documentaries, and other credible sources.
- Risk profiling for the complete company, inclusive of its employees and UBOs, to detect chances of fraud.
- Screening against global watchlists, sanctions, adverse media, PEP lists, and other legal sources.
Importance of Integrating Business Verification Services
The KYB process is a legal standard with stringent penalties and criminal proceedings backing its strength. Regulatory watchdogs strictly monitor enterprises to identify loopholes in their compliance programs. They later impose various diverse restrictions depending on the severity of KYB regulation breaches. Therefore, businesses require more than just simple authentication of companies to cope with emerging fraud risks and the evolving regulatory landscape.
Business verification services come with multiple checks to identify risks associated with a firm and prevent suspicious activities on the go. They provide a clearer view of companies by accurately verifying their status in real-time. Next are the two main reasons why enterprises should see automated KYB checks as necessary:
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Ensures Compliance with Regulatory Standards
Know your business is a legal standard put forth by majority of jurisdictions in the form of non-binding standards like FATF 40 recommendations and regional regulations such as the EU’s Anti-Money Laundering Directives (AMLDs). KYB checks help enterprises to ensure whether or not their partnering firm is subject to sanctions, adverse legalities, and any other scrutiny involved in criminal activities or poses any other fraud risk.
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Prevents Fraud Risks
AI-powered KYB checks enable businesses to identify traces of illicit intentions before entering corporate partnerships. They help enterprises to call off relationships with shell firms. Furthermore, companies using know your business services can prevent reputational damage and money laundering risks through adequate fraud prevention controls.
Benefits Businesses Can Reap by Using Automated KYB Checks
Automated KYB checks are the one-stop solutions for businesses as they involve everything from authenticating the company’s status and UBO identification to risk assessment. Enterprises can automate their client onboarding mechanisms within a single dashboard. They can set up advanced fraud detection controls that identify suspiciousness more efficiently. Furthermore, with KYB services, enterprises can verify business through in-depth investigations across global corporate records.
Further benefits of using business verification solutions include the following:
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Easy Integration
Due to their tech-driven nature, KYB solutions are easily integrated into businesses’ systems through API. Hence, enterprises won’t have to install separate software, download applications, or indulge in the hassle of complex coding.
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Swift Client Onboarding
AI-powered KYB checks automate company verification and offer swift onboarding by identifying information in real-time. With their user-friendly interface, enterprises can skip complexities otherwise involved in manual authentication.
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Cost-Effectiveness
Given their nature of reliance on emerging AI/ML technologies, automated KYB solutions are cost-effective and produce accurate results in minimal time.
Key Takeaways
Business verification solutions are customizable, making them easier to tailor per the company’s requirements. They are not dependent on time frames nor involve errors due to their use of AI/ML algorithms. Furthermore, KYB checks solutions comply with AML/KYC standards, making them more authentic and reliable. Businesses can put aside error-prone manual identification checks, overcome needless onboarding delays, and prevent hefty compliance expenses.