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Know Your Business (KYB) process has taken a place of relevance next to the better known and more widespread Due Diligence. What was once a voluntary security measure has now become mandatory by law for most businesses and institutions. Now, in addition to verifying the identity of individuals, they must also verify the identity of legal entities and their members.
Performing a Know Your Business process is essential to get to know the company you are working with and establish a B2B framework of mutual trust and guarantees, but above all to avoid any type of illicit and fraudulent practices.
Suppliers, partners, associates and other companies: establishing a secure framework
In business, before forging an alliance or signing an agreement with another party, a bond of trust is needed to arrive at that common benefit for the parties involved.
There is no better way than starting a business relationship knowing that our supplier, partner or associate is trustworthy and has lawful intentions. Transparency is key in these processes and by establishing Know Your Business controls, we ensure that everything is as told and expected, avoiding fraud attempts and bad experiences.
Companies have been pushed to deal with suppliers through non-face-to-face means and, if this was already a reality years ago with digitization, the turn of events has boosted it even more. No longer only for supplier relationships but also in SME environments where both must collaborate on joint projects.
Given the current state of the economy and society resulting from the healthcare situation, there has been a boom in the hiring of freelancers and freelancers to work with as suppliers. Establishing a reliable relationship with them from the outset is imperative to avoid unpleasant surprises and ensure a smooth start to business relations between the two parties.
Similarly, remote work and remote relationships in Business-to-Business environments have necessitated Know Your Business tools to make these remote interactions secure and reliable.
On the other hand, KYB has been the answer to many of the challenges faced in the early stages of Due Diligence processes, for example in mergers or partnership agreements to expand into other markets. The Know Your Business process makes it possible to acquire, merge, buy or agree within a framework of security like never before.
Operating with peace of mind and knowing that we are establishing a relationship with a reliable partner adds productivity to all operations and ensures their success.
What is Know Your Business - KYB
Know Your Business (KYB) can be defined as the process of verifying the identification information provided by a business. When we talk about conducting an investigation to verify the identity of a legal third party, we are talking about performing a KYB.
This process is located within the phases of Due Diligence operations and is a streamlining tool for processes that previously required a lot of time-consuming research and administrative tasks, yet with less reliable results.
Thus, KYB (Know Your Business) is the insurance to establish B2B relationships with confidence before making any important business decision.
The Know Your Business process includes many of the characteristics of the most well-known and widespread KYC (Know Your Customer). As with eKYC, the digitalization of KYB has brought about a great change, helping to speed up times, close deals in minutes instead of days and reduce the costs of this type of control.
Know Your Business (KYB), Know Your Customer (KYC) and Due Diligence: How do they relate?
Know Your Customer, also known as CDD (Customer Due Diligence), has a close and peculiar relationship with Know Your Business. These two security and verification tools share their main objective: to create a guaranteeing framework prior to any business relationship between a company and another subject.
KYB Know Your Business and Know Your Customer share technology and procedures. KYC is used by all industries, but especially those related to banking, finance, insurance and related industries to combat money laundering and identity theft, with the associated risks that this may entail.
In addition, performing both KYC and KYB checks is no longer an option, it is mandatory by law. AML rules or regulations such as eIDAS set the technical and regulatory standards that must be followed before transacting with customers or businesses.
All financial institutions and companies that carry out payment transactions in any sector are required by law to implement KYB processes for the verification of the companies with which they work or if there is any flow of money between them.
UBO: Ultimate Beneficial Owners
This concept refers to persons with both indirect and direct control over a company or organization as well as the owners of the company or organization. Know Your Business and due diligence processes seek to identify them and ensure that the information provided by the company wishing to work with us is truthful.
Beneficial owners are sometimes difficult to identify, especially when working in international environments. Complying with UBO guidelines is mandatory prior to conducting operations and KYB is able to ensure who they are so as not to incur risk.
Establishing agile and secure anti-fraud controls is easier than it might seem. Now, scalable digital platforms in pay-per-use format allow companies to develop Due Diligence procedures and UBO records with guarantees and the backing of a trusted third party expert in the field.
Know Your Business in B2B
B2B has its specific rules and regulations. We have two B2B perspectives where KYB helps in somewhat different ways:
- Companies with B2C activity: Here, as we have developed previously in the article, companies have relationships with others as suppliers, partners, associates or potential investors.
- Businesses with a B2B model: The company's main customer is another business and not a private individual. In this model, KYB is even more necessary, as it is the key point for a company to operate or not.
The opportunities for B2B companies in digital commerce have increased over the years. With this increase, B2B customers have also been evolving along with the reality in B2C companies.
Increasingly, decision-makers in organizations have a profile closer to the millennial. This has meant a complete transformation of the way of doing business and has brought the demands and needs of the usual consumer in the Business-to-Consumer to the Business-to-Business.
Electronic signature and KYB
These two tools, electronic signature and Know Your Business, are intertwined and complementary in B2B business models. Thanks to the combination of these tools under a single process, companies of this type have managed to boost the closing of opportunities in a previously unthinkable way.
Contracts and agreements are now closed in less time than ever before thanks to the implementation of holistic platforms that include identity verification and electronic signatures in conjunction.
At any time and place, decision-makers can sign contracts or delegate the signature to others with full legal backing given the reliability and security of these solutions.
How to choose the right KYB partner
There are several key aspects when choosing a Know Your Business solution for our business. One of the main ones is that the partner is a proven RegTech expert, with extensive knowledge of regulation and that adapts its products every time there is a slightest regulatory change.
On the other hand, it is crucial to take into account the interface aspect and the experience of the subject performing the electronic signature or Know Your Business process. On many occasions, bad practice in this sense and a rupturist integration can increase the abandonment rates and the loss of commercial opportunities.
Finally, the KYB system provider must be a specialist and know the industry to which you belong so that the Know Your Business tools are adapted to the specific use cases of the business model. The best companies tend to be those that know and have worked on use cases from all business sectors and operational areas of the company.
Who is affected by Know Your Business (KYB)?
The process affects any and all companies in any sector that have relationships with other companies. However, the law binds all those in the financial and related sectors, as well as payment companies or merchant acquirers that engage in intercompany transactions and transfers.
Automating the business verification and auditing process has been successful in driving acquisition, deal closure and cost and time savings for companies of all types, but especially those most strapped by regulation.
These companies, at times, establish exaggerated and tedious security procedures because they do not have an agile technology that, with the same legal backing and security, is capable of complying with the most demanding regulatory requirements while being developed simply and quickly.