KYB software for business customers

KYB is customer due diligence for legal entities. A company cannot show a passport, so the checks move from the customer to the people and companies behind it. The goal is the same as KYC: know who you are dealing with and what risk they bring.

• Entity verification: confirming that the company exists, is active, and matches the details it gave, using official registry data.
• Ownership mapping: building the chain of shareholders through holding companies and other legal arrangements up to the natural persons at the top.
• Beneficial owner identification: identifying the individuals who ultimately own or control the business.
• Screening: checking the company, its directors and its beneficial owners against sanctions, PEP and other risk lists.
• Risk assessment: weighing jurisdiction, industry, ownership complexity and screening results into a risk level.

Ownership structures can span several countries and several layers of companies, trusts and nominees. Each layer is a place where the real owner can be hidden, which is why shell companies, nominee directors and bearer shares are recurring red flags.

Sanctions add a second dimension. Under the OFAC 50 Percent Rule, entities owned 50% or more, directly or indirectly, individually or in the aggregate, by one or more blocked persons are themselves blocked, even if they appear on no list. A company can therefore be sanctioned without its name ever being published, and only an ownership view reveals it.

FATF Recommendation 10 requires firms to identify the beneficial owner of a customer and to understand its ownership and control structure. Recommendations 24 and 25 set standards for the transparency of beneficial ownership of legal persons and legal arrangements.

Many regimes, including the EU anti-money laundering framework and the US customer due diligence rule, use an ownership threshold of around 25% to define a beneficial owner, together with a test of control by other means. Firms should check the exact definition that applies to them.

• Ownership depth: can it follow ownership through several layers and across borders, and does it aggregate stakes held through different routes?
• Sanctions ownership logic: does it apply ownership rules such as the OFAC 50 Percent Rule, rather than screening only the names it is given?
• Explainability: can it show the path from a customer to a sanctioned or high-risk party, so an analyst can verify it?
• Registry data: which official registries does it draw on, and how current is the data?
• Screening of people: are directors and beneficial owners screened with the same quality as individual customers?