The regulatory landscape is in flux, and Know Your Business (KYB) expectations are evolving quickly. New rules are being introduced while others are delayed or reinterpreted, leaving risk and product teams at financial institutions and fintechs to navigate a growing sense of uncertainty. On top of keeping up with shifting regulations, providing seamless onboarding with comprehensive and accurate risk assessment is still a priority.
As organizations seek to balance compliance with operational efficiency, it’s essential to proactively follow and account for regulatory change. Currently, four trends are reshaping KYB processes and requirements:
- The evolution from point-in-time identity checks to perpetual KYB monitoring
- Moving goalposts for Ultimate Beneficial Owner (UBO) transparency
- The divergence of AI and privacy laws that affect product and risk teams
- Increasing sanctions that complicate compliance
These trends don’t just impact daily operations. They represent a broader shift in the way businesses need to verify, monitor, and report on the companies they work with. Understanding these changes will help build better KYB processes that are adaptable, auditable, and scalable.
Trend 1: Perpetual KYB is gaining ground
KYB is evolving from one-time onboarding identity verification to continuous monitoring throughout a business’s lifecycle. This process is known as perpetual KYB, or pKYB.
Instead of initial checks that are never followed up on or periodic reviews at fixed intervals, pKYB carries out real-time monitoring with automated systems that alert you to any change in business attributes like ownership, status, or other risk signals. This mirrors the transition toward perpetual KYC (pKYC) for consumers in banking and AML processes.
Why it matters
Upfront-only KYB checks create blind spots that can be exploited after onboarding. For compliance leaders who are personally accountable for meeting regulatory requirements, these blind spots can present a significant risk. Tech like artificial intelligence (AI), machine learning (ML), and advanced automation are making pKYB a possibility for risk teams without increasing lift.
Next steps
Evaluate your current KYB processes to determine how well they detect and respond to business changes over time. Consider implementing systems that enable continuous monitoring, rather than relying solely on periodic reviews.
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Trend 2: UBO compliance is caught in a regulatory tug-of-war
After ongoing legal battles that made it all the way to the Supreme Court, the Corporate Transparency Act (CTA) was set to take effect on January 1, 2025. This legislation would have required most U.S. businesses to report beneficial owners to FinCEN.
However, enforcement was paused in March 2025 with an interim final rule that exempts domestic companies and U.S. persons (including citizens, green card holders, and individuals who meet the substantial presence test) from reporting requirements. The rule now only applies to entities “formed under the law of a foreign country” that have registered to operate in the U.S. or any Tribal jurisdiction. Internationally, however, regulators continue expanding beneficial ownership requirements, creating an especially complex landscape for businesses operating across borders.
Why it matters
Even without consistent U.S. enforcement, banks, regulators, and auditors still expect visibility into ownership structures. UBO screening remains critical for sanctions, politically exposed persons (PEPs), and financial crime risk management. Beyond regulatory exposure, inadequate UBO verification creates significant reputational risk, as organizations increasingly face public scrutiny over their business relationships and potential ties to illicit finance.
Next steps
Foreign reporting companies with non-U.S. beneficial owners must still file by April 25, 2025 if registered before March 26, 2025. If formed or registered on or after March 26, 2025, they must file within 30 days of U.S. registration.
If you’re a U.S. company only operating domestically, you should continue to collect and validate beneficial ownership data, even if reporting isn’t being enforced. Maintaining robust UBO verification processes is essential for risk management and upholding the expectations of partners and regulators.
If you’re doing business internationally, you should ensure compliance with UBO regulations in your countries of operation.
Trend 3: AI and privacy rules are splintering across jurisdictions
In January 2025, the incoming presidential administration revoked Executive Order 14110, vacating the existing federal AI policy framework in favor of fewer regulations.
Simultaneously, several states like California, Connecticut, and Colorado are creating their own AI and privacy laws that trend in the other direction — that is, requiring explainability and auditability for automated decisions. Colorado’s approach is particularly notable, creating a duty of care for both developers and deployers of high-risk AI systems.
Internationally, the EU AI Act is now being rolled out in phases, starting with the first that was implemented in February 2025.
Why it matters
KYB systems that use AI for risk scoring, business verification, and other automated tasks have to navigate competing requirements depending on jurisdiction. AI-powered decisions may also be subject to new transparency and explainability laws that could rack up costly fines for violations (up to $20,000 in Colorado). This creates complex compliance challenges if you operate in a state with stricter AI legislation or internationally.
Next steps
Ensure decisions made by AI are fully defensible, auditable, and properly documented, even if it doesn’t seem like regulation or enforcement will affect your business currently. Taking a proactive approach to AI governance and explainability will help future-proof your compliance processes as this technology matures and compliance requirements change.
Trend 4: Sanctions lists are growing in volume and complexity
Since January 2025, the U.S. government has added over 75 new delegations of individuals, entities, and vessels to the sanctions list. At the same time, OFAC has doubled the required recordkeeping period for sanctions compliance from five years to ten, reflecting an increased focus on long-term enforcement.
With this added complexity, regulators are recommending contextual screenings that incorporate industry, geography, and related entity risk factors rather than relying on simple name-matching for accurate sanction checks.
Why it matters
The rapidly evolving compliance requirements now call for more sophisticated verification than list-checking. List-based screening tools often miss hidden connections between businesses and individuals, while also generating too many false positives — ultimately wasting both time and resources. With expanding sanction screening and monitoring requirements, risk teams need smarter approaches to stay compliant.
Next steps
Now is a good time to revisit your sanctions screening approach. Does it capture only direct matches, or can it identify more complex owner relationships that could be flagged by regulators? Consider adopting tools that provide more contextual insights and relationship mapping to reduce both false positives and dangerous gaps in your screening coverage.
Middesk helps you keep pace with regulatory change and KYB innovation
As compliance standards continue to shift, both risk teams and business leaders will have unexpected hurdles to overcome. Staying out in front will require awareness of emerging trends, along with the technical capabilities to address them effectively.
Middesk’s comprehensive KYB platform can help you future-proof your compliance processes with:
- Real-time business identity data from authoritative, integrated sources
- Structured UBO and sanctions workflows that easily adapt to changing expectations
- Scalable, audit-ready infrastructure that supports transparency and always-on compliance
With direct integrations to business registries across all 50 states and coverage of over 160 million business profiles, Middesk delivers the comprehensive verification capabilities you need to stay compliant today and tomorrow. Explore how Middesk can help you future-proof your compliance processes here.
