The due diligence process has so many components that complete it, and undoubtedly, because of that, the components involved will have clear relationships and links, given that they all share the same objective—validating information and confirming an individual or business is who they claim to be. As you complete a KYB check, you’ll see emerging links between various elements, including KYB & KYC, but why are there subtle connections? Let’s explore these important KYB relationships in more detail, highlighting why they are important to understand and how they affect the due diligence process.
KYB is one of those components that make up the client onboarding and due diligence checking process. Unsurprisingly, there are subtle relationships between KYC and other aspects of the process, including ‘Know Your Customer’ (KYC) and ‘Anti-Money Laundering’ (AML). These relationships are significant, and while they share their similarities and end goals, there are distinct differences between them.
The Important KYB Relationships
KYB and KYC
Let’s begin our look at the KYB relationships by putting the dynamics with KYC under the microscope. Both processes are crucial components of the due diligence process but have different objectives. KYB is about validating business information, while KYC is very much individual-focused, validating a single person’s identity documents and information.
While KYB and KYC have different focuses, they both involve scrutiny and verification to comply with regulations. The required data for KYB includes addresses, UBOs, and government records, while KYC requires proof of identity through government verification. Both processes require close attention to sanctioned entities and PEPs, with regular searches and media monitoring for potential controversies. Both play essential roles in firms’ processes, especially when completing due diligence on owners, businesses, and clients.
Despite their undeniable benefits, KYB and KYC come with significant challenges. The manual processes can be time-consuming and resource-intensive. However, investing in compliance provides substantial dividends by reducing risks, preventing illegal activities, and ensuring compliance with sanctions. Automated screening solutions are streamlining these processes, improving efficiency while maintaining meticulous attention to compliance requirements.
They have subtle differences, but both have the advantage of helping law firms take a risk-based approach to combatting money laundering and other financial crimes. In addition to this, they are both requirements when it comes to regulation compliance. Regulators are keen to ensure that both KYB and KYC are effective in validating information and are also being completed within the regulation framework.
The relationship between KYB and KYC is distinctive. While they have opposing objectives, in terms of their verification purposes, they both follow similar processes, confirm similar information such as address data and have the same goal of validating information efficiently and compliantly.
KYB and AML
The other important KYB relationship is with AML, and this is purely based on validating information compliantly to combat financial crime, such as money laundering. The relationship is apparent once you begin the process of confirming information about the businesses you are working with.
It’s essential that your firm has the procedures and protocols in place to tackle financial crime. Those plans must include an efficient onboarding process where you can fully authenticate the information a business has given you. This is where KYB and AML begin to establish a connection, as you need to confirm various pieces of information, including ownership structure, financial position, address details, and more.
This unique relationship allows you to meet your AML obligations by analysing all information presented by a business and reporting any anomalies and suspicious activity that arise while you’re assessing the business’s finances. With criminals becoming more elaborate, it’s essential your checks are thorough and can spot any signs of money laundering. It is also important to note that the relationship between KYB and AML ensures you can take a risk-based approach to protect your own business from potential threats.
Important Relationships That Have the Same Objectives
KYB has established relationships with KYC and AML, and while the differences are clear because both checks are part of the due diligence process, they share the same goal of validating information, even if the information in question is slightly different. They are all linked together by the need for regulatory compliance, enhanced client experiences, firm protection and reporting criminal activity.
It is these relationships that are the foundation of efficient client onboarding processes, and these checks ensure you are validating the information presented. KYB and KYB checks play a huge role in what businesses law firms work with, and these relationships with KYC and AML will have a bearing on whether the onboarding process is the same. KYB has many important relationships, and while the outcome is different, the objective is the same.
