The corporate world requires vigilant business verification while onboarding the company. The onboarding company involved in financial crimes is exposed to risk and threats. The business partner of the risky company may face legal consequences that are bad for its growth. The business screening involves several challenges to the company’s finances and reputation. For business verification, an organization must rely on KYB Know Your Business for a smooth onboarding. The KYB solution ensures financial security for the future and mitigates risks to avoid consequences.
Know Your Business
KYB is the process of rigorously investigating a business by collecting its data and relevant documents. The business due diligence evaluates the financial performance of the company in question. It helps to detect potential risks and red flags in the market. The business must comply with national and international standard regulations, and non-compliance results in penalties. The business verification ensure the business must comply with standard regulations.
KYB Know Your Business Process
The complete process of KYB consists of data collecting, documents screening, ultimate beneficial owner UBO verification, anti-money laundering AML checks, adverse media screening and enhanced due diligence. Let’s discuss here all the crucial steps in business verification.
Data and Documents Collection
The first step of business verification is to collect its name, address, contact number, registration number, tax reference number, and other relevant data. The business documents, including proof of address, balance sheet, bank statement, tax record, and other industry-specific documents, are collected. If any document is missing or invalid, it raises red flags in the market. The verified documents ensure that the business under scrutiny is legitimate and safe to onboard.
Document Screening
The collected documents undergo screening to validate their authenticity. The business documents are checked and cross-referenced to the government and legal bodies’ databases. This screening reveals that the business is secure enough to onboard and detect red flags.
UBO Verification
Ultimate beneficial owner UBO is an entity behind the business holding a significant share in the company’s assets and voting rights. Identifying the UBO in complex structured companies is quite challenging. For the UBO verification, the requirements include its name, address, contact number, photocopies of passport ID, and driving license. The jurisdiction for UBO verification depends on the country in which the business is operated. Therefore, it is necessary to determine UBO’s legitimacy according to the country’s jurisdiction in order to stay compliant with regulation standards.
Adverse Media Screening
One of the crucial steps in business verification solutions is adverse media screening, which is also called negative media screening. The adverse media screening involves collecting the news about the company from multiple resources. The news is analyzed using databases to assess the company’s financial performance and position in the market. This negative media screening reveals if the company has a record in black money or crimes.
AML Checks
Conducting anti-money laundering AML checks on the business in question is necessary to deter financial crimes. The business may be involved in money laundering, corruption, and other financial crimes, which results in legal consequences for partner companies. A company that fails to comply with international standard anti-money laundering (AML) regulations is vulnerable to fraud. Therefore, the business must hire the company after checking the company’s compliance with AML laws. As a result, the potential risks are identified, and the threat of fraud is minimized in the future.
Additionally, background checks are applied over the company to determine its legal status. The primary goal in applying background checks is to find out the company’s history in money laundering, terrorist financing and other financial crimes.
Enhanced Due Diligence
The high-risk business does not require one-time screening, but enhanced due diligence is required. Enhanced due diligence involves the constant monitoring of the companies to track their financial performance. Suspicious activities are detected in this way, so healthy financial relations are built in the industry.
Concluding Thoughts
Business verification is the primary requirement while making financial bonds these days. The verification process involves a complete investigation of the business so the partner company can make an informed decision. Evaluation of the economic performance helps in third-party risk mitigation, so it ensures financial security for partner companies. Once the business applies AML checks over the company, the red fags are detected promptly. So, the business can categorize the partners based on the risk level. In the long run, business verification while onboarding results in strong financial bonds, which helps the reputation of the market grow.
