In brief:
- KYB solutions are tools that assist with automating the identity verification and risk assessment of onboarding businesses
- KYB solutions aggregate data from disparate sources, reduce human error, and can be customized to fit a company’s specific needs
- Some important factors to consider when choosing a KYB solution include its adherence to relevant regulations, data security, ease of use and integration, speed and degree of automation, flexibility, and cost effectiveness
The Panama Papers scandal of 2016 highlighted the need for companies to verify the identities of business and their owners as clients or partners, as well as the identities of individual people as customers.
This addition to their regulatory workload has caused many companies to search for ways to automate their Know Your Business (KYB) process to conserve resources for other operations, and cut down on manual reviews unless they are needed for Enhanced Due Diligence (EDD).
But there are so many KYB solutions out there that focus on different things — business verification, identity verification, AML, Know Your Customer (KYC) verification — so how do you choose a solution that has everything you need, without the things outside of your use case?
We’ll help you find the right fit, covering these topics to do it:
- 5 key KYB solution features to look for in a provider
- Top 4 KYB solutions to choose from for different business types
- How to choose a KYB solution that fits your priorities
- 5 benefits of using a Know Your Business solution
- 4 FAQs about Know Your Business solutions
- Cover your KYB obligations with Middesk
Let’s start with the key features to focus on when choosing a tool, so you understand what you’re looking for when you compare tools side by side.
These are the essential features you need a KYB solution to provide, so ensure you can perform the core aspects of KYB checks.
1. High-quality Know Your Business data
The data your KYB solution is using should be comprehensive, and offer all the following things essential to KYB compliance:
- Complete - Key data points aren’t missing from datasets
- Accurate - Your data aligns with the source of truth
- Fresh - Data is refreshed and updated frequently
- Consistent - Data values for the same entity are the same across sources, datasets, and data points
- Unique - Data doesn’t contain duplicates or redundancies
2. KYB data that comes from both authoritative and alternative sources
Authoritative sources are government agencies like the Secretary of State (SOS) filings, Employer Identification Numbers (EINs), business licenses, tax status verifications, and UBO (Ultimate Beneficial Ownership) declarations.
Alternative data includes things like web presence analysis, online footprint, social media and directory listings, business email and phone number consistency, IP address behavior, online reviews, and negative press mentions or adverse media screening.
The most effective KYB approach doesn’t choose one type of data over the other, but combines them to provide even deeper context for fraud detection during onboarding. So a more effective KYB solution will provide both types of data.
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3. Risk scoring capabilities
In addition to verifying business identities through name, address, and EIN/TIN matching, a KYB solution should offer risk scoring based on the information returned. Middesk Signal for example can score the risk of onboarding a business with only 2 inputs: business name and address.
4. Rule-based policies to customize your onboarding flow
Setting up policy rules that meet your specific compliance and onboarding requirements simplifies your KYB process by letting you auto-approve the businesses that meet all of these requirements, and escalate cases that require a manual review. This means you only need to review things that require human intervention, and can let the KYB solution handle the gruntwork.
Middesk Policies for example helps you auto-approve more businesses faster by letting you configure your policies to meet compliance and onboarding requirements across key dimensions. Things like business name, address, watchlist status, or EIN can be customized to flag businesses that don’t meet certain requirements or risk thresholds.
5. Monitoring capabilities for ongoing compliance KYB checks
It’s not enough to just check once — what if the company you work with later files for bankruptcy, or ends up on a watchlist? Ongoing compliance requirements mean that not only do you need to verify this information at onboarding, but periodically over time throughout the entire customer lifecycle.
You want a tool that can notify you of changes in the status to a business, like if they filed for bankruptcy, had a lien filed against them, appeared on a watchlist, updated their SOS business registration, or changed their EIN/TIN.
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Now that we’ve identified some of the essential includes in a KYB solution, which vendors deliver on them? Here are five popular options.
1. Best for business verification and risk assessment: Middesk
Middesk provides business verification and underwriting solutions that draw data directly from authoritative U.S. government sources, including all 50 Secretary of State (SOS) offices. When it comes to business identification information, Middesk provides:
- Verification of business names, addresses, and people associated with the business
- EIN / TIN verification
- Business documentation like Articles of Incorporation
- Industry classification including high-risk industry scoring
- PEP, OFAC, SDN, Sanctions Lists, and Watchlist screening
- UCC liens, litigation, and bankruptcy status and data
- Ongoing monitoring capabilities to notify you when business status changes
- Adverse media, web presence, and online footprint analysis
Middesk is truly an end-to-end solution that can retrieve the business identity information you need, verify it against the information provided to you by your customers, then score the risk of onboarding with supplementation KYB data, and help you perform perpetual KYB through ongoing compliance monitoring.
2. Best for global KYC: Ondato
Ondato’s KYC, AML, and KYB solution takes a “build your own process” approach to assisting with business verification. Companies can choose from a fully-automated photo-based version, an agent-assisted video-based version, or a version that relies on manual ID document uploads.
Ondato’s system can pull identity and risk-related business information from nearly 200 different countries, and can identify the ultimate beneficial owners of businesses in 50 countries. So Ondato is better suited to companies who need business verification in countries outside of the U.S. as well.
3. Best for AML monitoring: Alloy
Alloy offers end-to-end identity and fraud prevention for financial institutions and fintechs to help them manage onboarding through ongoing fraud detection, AML monitoring, and credit underwriting.
Alloy even uses Middesk to verify business identities to screen for fraud for their customers!
4. Best for KYC & ID verification: iDenfy
iDenfy provides a comprehensive approach to identity verification and risk assessment. It offers a customizable platform that is able to verify over 2500 types of ID documents from over 190 countries, screen AML watchlists and sanctions lists, and verify addresses and telephone numbers. It also has good customer service that even helps out with manual case reviews.
iDenfy is more suitable as a global solution for companies who need data outside of the U.S., or for companies focused on individual’s ID verification rather than just businesses.
To fully assess the KYB solutions that you’re considering, review our breakdown of how to run a KYB vendor test to determine which option is the best fit for you.
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Once you compare features and line up the tools that might work for you, how do you evaluate their importance and how they stack against each other? Here are some of the key considerations different types of companies should think about when prioritizing what’s most important in your KYB solution:
1. Level of automation
A KYB solution’s ability to automate repetitive KYB tasks is key to avoiding inevitable human errors from performing these tasks manually, and lightens the workload of compliance team members so they can devote more time to higher-priority work.
Types of Companies This Is Most Important To: All companies looking to scale or better utilize internal resources.
2. Customization of rules that fit unique KYB process requirements
A company should be able to customize the solution not only to adhere to relevant regulations, but also to hone in on risks that the company encounters frequently and/or considers most dangerous.
Expert tip
Most companies set up their own rule sets that set off red flags based on your own unique risk threshold. Middesk Policies can help you build out rule sets that have helped our customers see a 31% uplift in auto-approvals, without exposing themselves to increased risk.
Types of Companies This Is Most Important To: Companies that have a custom risk-based onboarding process with rule sets.
3. Scalability
Your KYB solution should be able to scale with the volume of businesses you take on as clients or partners. Look for a solution that has everything you need built into the core tool or product so you’re not looking at a lot of increased costs with add-ons as you scale up.
Types of Companies This Is Most Important To: Companies currently in the process of scaling.
4. Ability to comply with changing KYB regulations
A KYB solution should be configured to function in accordance with the KYB regulations of the industry and jurisdiction in which it’s to be used. Ideally, it should also be able to automatically update to account for any additions or changes to these regulations (which can happen frequently and without warning).
Types of Companies This Is Most Important To: Global companies that operate in different jurisdictions and countries.
5. Focus on data security and privacy
KYB involves handling sensitive information such as business identity data and financial records. Therefore, it’s crucial to protect this information from unauthorized order to maintain the trust of (potential) clients and partners.
Types of Companies This Is Most Important To: Companies with a comprehensive onboarding application that collect a lot of information upfront.
6. Ease of integration and use
To maximize efficiency, a KYB solution should be able to integrate seamlessly with a company’s vendor stack. It should also offer a user-friendly interface so compliance team members can set up and execute KYB-related tasks faster. The provider should also have effective customer support channels to promptly address any questions or problems.
Types of Companies This Is Most Important To: Companies using other tools for KYB, or who want to build out an API.
7. Value for money
When choosing the right KYB solution, affordability is always a concern. Often, pricing will vary depending on how many people will have access to the system, how much business data it will be processing, and how much customization is needed for it.
You should also take into account how well it does the other features listed above. A more expensive system may be the best choice if its functionality is a better fit for the company’s needs.
Types of Companies This Is Most Important To: Non-enterprise companies looking for the right fit when it comes to pricing.
We’ve already touched on a few reasons to utilize KYB solutions for compliance purposes. Now, let’s do a deeper dive into five specific benefits of using one.
1. You can source all your business verification data from one place
The data needed for KYB tends to be spread out across several places, like different levels of government, private corporations (e.g. credit bureaus), and even different departments within the same company.
A KYB solution searches and aggregates information from all relevant places at once so compliance analysts don’t need to check each one individually.
2. You speed up KYB data processing
Doing KYB manually is tedious work that slows down the rate at which businesses are checked and/or onboarded. A KYB solution can significantly speed up the process, allowing for more businesses to be cleared or rejected in less time, sometimes shortening work that used to take weeks into only a few minutes.
3. KYB task automation becomes possible
Know Your Business solutions do more than just speed up parts of the KYB process — they can complete some tasks without needing manual intervention at all. This allows compliance team members to instead focus on high-priority investigations that require manual oversight, or other projects that more directly advance the company’s goals.
4. Avoid human error and mistakes
Another danger of having the KYB process be too manual is that it increases the risk of human error. A mistake or omission in data entry can lead to misinformed decisions based on incorrect information.
Automated Know Your Business solutions minimize this risk by completing tasks in virtually the same way every time.
5. You can customize a KYB tool to fit your company’s needs
Companies may have to abide by slightly different KYB regulations depending on what industry they operate in. And depending on a company’s unique circumstances, it may be more vulnerable to certain risks – or at least encounter them more frequently.
Many software-based KYB programs can be customized to comply with specific rules and be tweaked to be more sensitive to particular threats.
Here are the other questions asked about Know Your Business solutions we haven’t had a chance to answer yet.
1. What is a Know Your Business (KYB) solution and how do they work?
A Know Your Business (KYB) solution retrieves data to verify the identity of a business, reviewing authoritative data sources like the Secretary of State (SOS) offices and credit bureaus to validate information about the business. It then returns results with that information, and other information that assess the risk of onboarding that business as a customer.
KYB solutions often come in the form of software, offering a dashboard that lets you order information about a business, and then follow up with additional information.
2. What do KYB solutions help companies do?
Know Your Business is a two-part process. One part of it is determining whether a business and its owners actually exist and are representing themselves truthfully. The other part is assessing the potential risks the business presents if you choose to onboard them.
Companies that want to onboard businesses as customers are required by law to know that those businesses actually exist, are honest regarding what they are, are operating within the law, and are representing themselves truthfully and not involved in illegal dealings.
Companies that want to survive need to adequately assess the risk of onboarding businesses onto their platform, making sure they maintain trust with their other customers. Just because a company isn’t a shell corporation or doing anything illegal, it doesn’t mean onboarding them is a good idea if they’re currently filing for bankruptcy.
3. How do KYB solutions automate business verification?
Without the use of a KYB solution, a team member would have to manually search the SOS databases for each state (they are all different) one by one to verify submitted information from the business you are trying to onboard. This can take hours per business, and is only step one in the KYB process.
A KYB solution automates KYB checks by searching multiple databases at once to find the information you need, and can return results for everything you need in one place, rather than using multiple tools to find it.
KYB solutions can also include APIs, which can automate this process even more at scale, letting you order searches on hundreds or thousands of businesses — which can be especially helpful for ongoing compliance and perpetual KYB checks to ensure your customers are still operating legitimately.
Middesk’s KYB software is an essential part of a KYB tech stack because our data is comprehensive, fresh, and reliable, covering every registered business in the United States (over 100 million) with 92% of business data refreshed within 10 days, so you know the data is complete and accurate.
All of this work takes time and money that few companies can afford to spend. That’s why they need a solution like Middesk. Our platform draws data from U.S. Secretary of State offices and other official sources to provide information about a business’s identity, registration, taxes, watchlist status, industry category, web presence, litigations, and more.
Set up a demo to see our full KYB capabilities and how we can enable your business verification process, and set up a hands-on demo. If you want to see how it works right now, jump into our on-demand product demo and see how Middesk Verify works:
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