Misturat AlausaKYB (Know Your Business) verification enables businesses to confirm a company’s legal registration, tax and VAT information, and ownership details. These checks help businesses determine whether a company is legitimate before entering into a business relationship.
Also, when businesses operate across multiple markets, verifying business registration, tax IDs, VAT numbers, and ownership information can be time-consuming and difficult to manage manually. Therefore, adopting automated KYB business verification into the business operations makes it easier to check these details against reliable registries and databases, making onboarding and compliance decisions easier.
What Do You Need Before Verifying a Business?
There is key information businesses need to collect to confirm a company’s identity and legitimacy before starting a KYB business verification. These details usually include business registration details, tax IDs, VAT numbers, ownership information, and other supporting documents. The specific documents required differ based on the country, business type, and regulatory requirements.
In general, businesses should have the following information ready:
- Business registration details: Legal business name, registration number, registered address, and country of registration.
- Tax information: Tax Identification Number (TIN), VAT number, or other relevant tax identifiers.
- Ownership information: Details of directors, shareholders, and Ultimate Beneficial Owners (UBOs).
- Supporting documents: Certificates of incorporation, business licenses, or other documents required to verify the company’s legal status.
Having this information ready from the start gives compliance teams a clear basis for verifying whether a business is registered, its tax information is valid, and its ownership structure can be confirmed.
How Do You Confirm Business Registration and Existence?
After collecting the company’s basic information, the next step is to verify that it is legally registered and exists as stated. This means cross-checking the information provided against records from an official business registry or other authoritative source.
A typical business registration verification process includes:
- Collect the company’s core details: Begin with the legal business name, registration number, registered address, and country or jurisdiction where the company is registered.
- Check the official business registry: Use the company’s registration details to search the relevant government or official registry.
- Compare the records: Check the details provided such as legal name, registration number, status, and other available records, to see if it is consistent with the information submitted by the business.
- Verify the company’s registration status: Confirm whether the business is active, registered, dissolved, suspended, or subject to any restrictions according to the available registry records.
- Investigate discrepancies: If the submitted information does not match the registry record, the discrepancy should be reviewed before approving the business for onboarding.
This process can be more complex for businesses operating in multiple countries because registry systems, available information, and verification requirements vary by jurisdiction.
How Do You Screen Beneficial Owners for Risk?
Verifying a business goes beyond confirming its registration details. Businesses also need to understand who owns or controls the company. This is where Ultimate Beneficial Owner (UBO) verification comes in. A UBO is the person who ultimately owns or controls a business, even when ownership is held through other companies or legal structures. Identifying these UBOs helps businesses assess who they are entering into a business relationship with and determine whether any ownership structure presents any potential risks.
A typical UBO screening process includes:
- Identify the beneficial owners: Review the company’s ownership structure to identify the individuals who ultimately own or control the business.
- Verify their identities: Check the identity information submitted for each beneficial owner and ensure that it matches the available records.
- Screen for potential risks. Cross-check beneficial owners against relevant sanctions lists, watchlists, PEP databases, and other applicable risk sources.
- Review and resolve issues: If a beneficial owner cannot be verified or a screening result raises concerns, investigate the case further before completing onboarding.
UBO verification is a key part of KYB business verification because a company may appear legitimate while its ownership structure presents additional risks. Understanding who ultimately controls a business gives compliance teams a clearer picture of the entity they are assessing.
For more information on how UBO verification works and why it matters, read this article on KYB Compliance: Verifying Ultimate Beneficial Owners.
What Mistakes Undermine KYB Verification Programs?
Even with a structured KYB process, certain gaps can make business verification less reliable. Common mistakes include relying on outdated information, failing to verify ownership, overlooking discrepancies, and treating KYB as a one-time check.
Some of the most common KYB verification mistakes include:
- Relying solely on provided information: Businesses should ensure that information and documents submitted during onboarding should be verified against reliable external sources rather than accepted at face value.
- Failing to verify the ownership structure: Confirming that a company is registered does not show who ultimately owns or controls it. UBO verification should be included in the KYB process where required.
- Ignoring mismatched information: Differences in registration records, tax details, ownership information, or submitted documents should be reviewed and resolved rather than overlooked.
- Using outdated business information: Company details can change over time, including ownership and registration status. Relying on outdated records can result in inaccurate risk assessments.
- Treating KYB as a one-time check: For ongoing business relationships, ensure to conduct periodic or event-driven reviews to help identify important changes after initial verification.
Avoiding these mistakes helps businesses build a more reliable KYB business verification process and make informed decisions about the companies they work with.
Looking to adopt automated KYB business verification into your operations? Talk to our team.