What is KYB (Know Your Business)?
Know Your Business (KYB) refers to the process financial institutions and other regulated entities use to verify the identity and legitimacy of business customers. Also known as Business Know Your Customer (BKYC), KYB extends traditional Know Your Customer (KYC) procedures beyond individual customers to encompass corporate entities, partnerships, and other business structures.
KYB compliance requires institutions to collect and verify detailed information about business customers, including company registration details, ownership structures, beneficial ownership information, and the nature of business activities. This process helps prevent money laundering, terrorist financing, and other financial crimes whilst ensuring compliance with regulatory requirements across multiple jurisdictions.
Unlike individual checks that verify personal identity, KYB examines complex business structures, ownership chains, and relationships that often cross international borders.
What are the requirements for a KYB program?
Modern KYB programmes encompass several critical elements that work together to provide comprehensive business customer due diligence.
Company verification and registration checks
Financial institutions must verify that business customers are legitimate, registered entities. This includes confirming company registration numbers, incorporation dates, registered addresses, and current legal status with relevant corporate registries. Institutions also verify that businesses maintain good standing with regulatory authorities and tax agencies.
Beneficial ownership identification
KYB procedures require identifying and verifying individuals who ultimately own or control 25% or more of a business entity. This process involves mapping complex ownership structures, including shell companies, trusts, and multi-layered corporate hierarchies. Beneficial ownership verification helps institutions understand who truly controls their business customers.
Business activity assessment
Institutions must understand the nature of their business customers' operations, including industry sectors, geographical presence, customer base, and revenue sources. This helps banks understand how risky each business customer is and what level of monitoring they need.
Sanctions and PEP screening
Business customers and their beneficial owners must be screened against sanctions lists maintained by national or global authorities. Institutions also screen for Politically Exposed Persons (PEPs) among beneficial owners and key personnel.
Ongoing monitoring and periodic reviews
KYB compliance extends beyond initial onboarding. Institutions must continuously monitor business customers for changes in ownership, business activities, risk profiles, and regulatory status. Regular periodic reviews ensure that customer information remains current and accurate.
Regulatory frameworks governing KYB
KYB compliance operates within a complex regulatory environment that varies by jurisdiction but shares common principles derived from international standards.
UK and EU requirements
The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 in the UK and the EU's Anti-Money Laundering Directives establish comprehensive KYB requirements. These regulations mandate customer due diligence procedures, beneficial ownership registers, and ongoing monitoring obligations for financial institutions and other regulated entities.
International standards
The Financial Action Task Force (FATF) provides global guidance on KYB through its recommendations on customer due diligence and beneficial ownership transparency. These standards influence national regulations worldwide and establish minimum requirements for business customer verification.
Sector-specific requirements
Different industries face varying KYB obligations. Banks face the strictest KYB rules, but payment providers, crypto exchanges, and other financial services also need strong procedures that match their specific risks.
Building an effective KYB programme
Successful KYB implementation requires a risk-based approach that balances regulatory compliance with operational efficiency.
Risk assessment and categorisation
Institutions should develop risk matrices that consider factors such as business type, geographical presence, ownership complexity, and transaction patterns. Higher-risk businesses require enhanced due diligence procedures, whilst lower-risk entities may qualify for simplified measures.
Technology and automation
Modern KYB programmes leverage RegTech solutions that automate company registry searches, beneficial ownership mapping, and sanctions screening. These technologies reduce manual processing time whilst improving accuracy and consistency across the customer base.
Real-time monitoring capabilities
Advanced monitoring systems enable real-time assessment of business customer risk profiles, allowing institutions to respond quickly to ownership changes, regulatory updates, and emerging threats.
Documentation and record-keeping
Comprehensive documentation standards ensure that KYB files contain all required information and supporting evidence. Institutions must maintain records for specified periods and ensure they're readily available for regulatory examinations.
Staff training and governance
Effective KYB requires trained personnel who understand complex corporate structures and regulatory requirements. Clear governance frameworks establish accountability and ensure consistent application of KYB procedures across the organisation.
Challenges in modern KYB compliance
Contemporary KYB programmes face several significant challenges that require innovative solutions and robust risk management approaches.
Complex ownership structures
Modern businesses often employ sophisticated ownership arrangements involving multiple jurisdictions, nominee shareholders, and layered corporate structures. These arrangements can obscure true beneficial ownership and complicate verification procedures.
Cross-border complications
Businesses operating across multiple jurisdictions present challenges for KYB compliance, as institutions must navigate varying regulatory requirements, data protection laws, and corporate transparency standards in each relevant country.
Data quality and availability
KYB procedures depend on accurate, up-to-date information from corporate registries and other official sources. However, data quality varies significantly between jurisdictions, and some countries provide limited transparency regarding beneficial ownership.
Regulatory evolution
KYB requirements continue to evolve as regulators respond to emerging threats and close regulatory gaps. Institutions must stay current with changing requirements whilst maintaining operational efficiency and customer satisfaction.
KYB compliance FAQs
What information is required for KYB compliance?
KYB procedures typically require company registration documents, beneficial ownership information, business licences, financial statements, and details about business activities and customer base. The specific requirements vary based on the institution's risk assessment and applicable regulations.
How often should KYB information be updated?
Regulatory requirements vary, but most jurisdictions require periodic reviews at least annually for standard-risk customers and more frequently for higher-risk businesses. Institutions should also update KYB information when they become aware of significant changes in customer circumstances.
What are the penalties for KYB non-compliance?
Non-compliance can result in significant fines, regulatory sanctions, business restrictions, and reputational damage. In severe cases, institutions may face license revocation or criminal charges against senior management.
· Oct 28, 2025