What is KYB?
KYB, also known as Know Your Business, is an essential component of modern business and fraud prevention. It allows companies to verify that another company is legitimate before doing business with them. KYB is critical as companies have to contend with fraudsters and hackers who pretend to be legitimate businesses to conduct fraud. KYB is newer than KYC protocols, as businesses have primarily been focused on combating fake customers rather than businesses. Unfortunately, this allowed fraudsters an excellent opportunity to take advantage of companies that needed to be more diligent when it came to KYB. Regulators began adding KYB regulations to many industries in the past decade in order to combat this type of fraud.
Anti-money laundering and customer due diligence regulations require a wide range of companies to conduct robust KYB checks with any business they intend to work with. This impacts many different industries, from gambling services to financial institutions. While KYB is not foolproof on its own, it has made it far more difficult for criminals to access funds illegally.
How does KYB work?
Financial service companies need to verify a wide range of information to meet KYB regulations. This ensures that adequate information is collected to prove the legitimacy of the business. The following data points are needed to meet KYB regulations and onboard new customers.
- Business Name
- Business Address
- Taxpayer Identification Number
- Business Registration Status
- Licensing Documents
- Ultimate Beneficial Owners
Collecting all of this information can take extensive time, and any errors can open a financial services company up to fraud and fines. Additionally, companies need to maintain updated customer information in order to meet KYB requirements, and this requires checking with multiple different sources for the necessary information.
Underwriting and KYB
Underwriting is an essential financial service component and often quite complicated. Proper underwriting requires cross-checking with multiple data sources to assess a potential client's risk properly. There is a lot of overlap between underwriting and KYB, as underwriters must ensure they are only approving legitimate businesses to be onboarded.
With KYB being such an essential building block of underwriting, companies are always looking for solutions that make KYB easier. Ensuring the legitimacy of a business is one of the first steps of the underwriting process, as without it, there is no guarantee that the potential customer is not a fraudster. Additionally, companies want faster KYB solutions that reduce onboarding time but do not compromise security. Businesses want to know that the financial service company they want to onboard with provides a secure and convenient service.
KYB Challenges
Time-Consuming
There is a substantial amount of information financial services companies must gather in order to meet KYB requirements, and they must keep updated records of this information for their current clients. This requires much time to accomplish manually and can be complicated.
Costly
To accomplish KYB manually, a company may need to hire an entire team to verify the legitimacy of businesses, constantly update that information, and ensure the new information is accurate. For small or new businesses, this can be completely impractical to do in-house as they lack the resources to support a KYB team.
Regulations
KYB regulations are robust and complicated. This only adds to the time and costs associated with KYB verification. Laws and regulations surrounding KYB often change or are updated, and this means financial service companies must adjust, making KYB even more challenging and costly to follow. With KYB as a necessity due to regulations, companies often need help finding the balance between security and ensuring profitability.
AI and KYB
In the face of the challenges of KYB, many financial service companies and underwriters have turned to AI and machine learning to make KYB better. This makes complete sense as AI is ideally suited to tackle the ever-changing regulatory landscape of KYB and analyze and verify data from a variety of sources. There are numerous benefits to implementing AI into a company's KYB process.
Accuracy
With the complexity of KYB regulations, it is not surprising that there are many human errors when it is accomplished manually. AI enables companies to easily avoid these human errors, which can lead to costly fraud or fines. Cross-referencing is also easy with AI, allowing companies to be assured that the information they collect is accurate.
It is also difficult for compliance officers to monitor current customers closely and continuously to ensure they are not associated with risky businesses. This can lead to numerous human errors, as compliance officers understandably need help maintaining constant vigilance. Fortunately, with AI, companies can maintain this vigilance 24/7 without worrying about human error.
Time
KYB often takes quite some time to complete as companies must verify numerous data points from a variety of sources. This can bring customer onboarding to a standstill and be a frustrating point of friction for customers. With AI implementation, companies can dramatically speed up their KYB process with instant decision-making and data collection.
Improving the overall speed of onboarding is hugely important for financial services companies, as more than ever before, customers want real-time solutions. They do not want to wait around for days or weeks for a company to go through a mountain of paperwork. Additionally, AI enables compliance officers for companies to focus on the bigger picture and more complex compliance challenges rather than doing all the busy work of KYB.
Compliance
Compliance is so much easier with AI-enabled KYB. Companies can configure their KYB system to follow compliance regulations to the letter, and it is easy to update the system with any new regulations. This saves companies even more time and further mitigates the risk of errors.
As mentioned earlier, this also frees up compliance teams to improve companies' overall compliance standards. With AI, financial service companies can automate their regulation compliance while having the time to make their security even more robust, thanks to the time saved by AI. Altogether, AI is a complete game changer for KYB and, by extension, underwriting.
KYB with Under
Fortunately, with Under, accessing the best KYB solutions for your business is incredibly easy. Thanks to our partnership with Middesk, you can access their KYB integration through our system. KYB via Middesk enables you to automate the entire process fully, making your KYB process the most efficient it can be. Rather than being frustrating, your KYB will be streamlined and straightforward, enabling an easier decision-making process and customer onboarding.
KYB, with our system, allows your business to check and verify a variety of essential information automatically. These include industry classification, documents, litigations, company registration, tax identification number, and many others. This allows your underwriter to know with certainty that you are only engaging with legitimate businesses. Our KYB integration with Middesk is easily adaptable to your specific needs, like the rest of our underwriting and onboarding solutions. Your company needs customizable KYB and underwriting solutions. This customization allows you to present your customers with the onboarding experience they need and makes you stand out from the competition.
KYB is an essential component of the underwriting process, but it is not the only one. With Under, it is easier than ever to streamline your entire underwriting and onboarding process. We offer a wide range of solutions to help with every step of the process. These solutions include PDF mapping, multi-factor authentication, online form and application templates, e-signature, and a variety of others. With Under, accessing the true power of KYB and other top-of-the-line underwriting solutions is easier than ever.
