Know Your Business Solution - The Key to Keep Shell Companies Away
In this age of digitization, where illegal activities are prevalent, protecting a company's interests before working with other organizations has become an imperative need. Firms that supply services to others rather than their own customers must be extra vigilant during the onboarding process. Thus, a know your business solution is a great bet to keep shell companies away.
Know Your Business (KYB) is a customer due diligence method that corporations should use to check the organizations they serve. It assists them in determining whether the firm with which they are dealing is legitimate or fraudulent. Now that it is clear what it means to know your business, let's move on to the KYB procedure.
The Process of Business Verification
A KYB verification solution works in the following steps:
Authenticating Companies’ Registration Documents
A business is required to give numerous records in order to obtain information about its operations, which is subsequently validated. This must include information such as the company's name and number, address, incorporation date, and registration certificate. The more facts provided, the higher the company verification completed to determine whether the specific entity is phony or legitimate.
Verifying a Business Against Sanctions and Blacklists
Many countries' governments and financial institutions have developed sanction lists of firms they are certain of or suspect of being involved in serious crimes like money laundering. To ensure that any company-to-company partner is not on those sanction lists, a large volume of data must be examined, cross-referencing the business' names, assumed identities, and customers within the organization with various sanction lists all over the world.
Checking for Negative Media Coverage
A negative media coverage implies that there may be something fishy going on in that business. This stage involves screening information from various territories to see if the organization has ever been covered by the media for being involved in terrible crimes or illegal activities that result in high-risk profiles and make them unacceptable for beginning or carrying out business with.
Verifying Businesses Ultimate Beneficial Owners (UBOs)
In the EU, an ultimate beneficial owner is someone who holds a 25% or greater stake in a company, has a 25% or greater voting power, or has authority over the company to make choices and implement various plans. Only a few are open about their status, while others hide it and wield power through intricate business organizations, making it extremely difficult to identify them.
To decrease the possibility of the company being a target of unlawful activity, it is vital to understand who the organization's ultimate beneficial owners are. The European Union additionally implemented AMLD5, which requires each member state to maintain a publicly accessible list of UBOs. It is a significant step toward transparency, particularly when considering who holds the purse strings in enterprises throughout the European Union.
Screening for PEPs
Politically Exposed Persons (PEPs) are those with a higher position who are vulnerable to scams, bribery, and corruption. If somebody in the organization is politically exposed, or if they are the ultimate beneficial owners or just occupy another important role within the company, the danger of working with that corporation increases dramatically. It is essential to check those that appear on the PEP list to mitigate the risk of fraudulent activities and offer customers with a greater sense of security.
Business Verification Services - Best Practices
The best practices for verification of the business include:
Automate Processes
Manually verifying customer companies is not only difficult but also tedious. Streamlining verification with KYB solutions not only improves but also expedites the onboarding process for any company. Verifying companies with AI-powered checks not only improves the customer experience but also allows the organization to focus on activities that are important and require more attention.
Real-Time Monitoring
As circumstances change, numerous people enter or exit on UBOs and other sanctions and watch lists. Continuous monitoring is critical for avoiding such scammers and staying one step ahead of potential hazards. As a result, know your business services not only check enterprises upon onboarding but also keep monitoring them.
Conclusion
Money laundering isn't an entirely novel concept, and fines that businesses must pay for failing to comply with Know Your Business requirements may be prevented. To ensure that all international KYB rules are followed and that the organization is not used for unlawful purposes by perpetrators, it is critical to deploy a robust know your business solution and keep it up to date.