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 streamline – or even automate – Know Your Business (KYB) in order to conserve resources for other operations.
Many KYB software providers and solutions, catering towards this purpose, have popped up since then. But with all the choices available, how does a company choose which solution is the best fit for them? And why is a KYB solution necessary in the first place? This article discusses the options and reasons.
First, let’s talk a bit more about what a KYB solution is, as well as why it’s now virtually necessary for a company to have one when engaging in B2B relationships.
A KYB solution helps a company onboard or manage another business as a client or partner. It works to verify the authenticity of a business and the identities of its owners, as well as evaluate the risks they may present to the company.
Know Your Business, or KYB, is a twofold process. One part of it is determining whether a business and its owner(s) actually exist and are representing themselves truthfully. The other part is assessing the potential risks the business’s (and its owners’) statuses and actions present to a particular company.
This process is now mandatory in many places in order to comply with laws on preventing money laundering, terrorism financing, financing the proliferation of weapons of mass destruction, and other forms of financial crime. But it’s also a lot of extra work companies have to do to ensure they’re operating legally.
As a result, many companies look for ways to streamline and even automate KYB (or at least parts of it). Their goal is to maintain compliance with regulations while freeing up resources – mainly time, money, and personnel – to work on high-priority risk investigations or other projects more in line with their main objectives.
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.
So how does a company choose the software-based KYB solution that’s the right fit? Here are some of the key considerations.
This is a somewhat obvious thing to look for when choosing a KYB system provider, but it’s important nonetheless. The solution should be configured (or at least configurable) 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).
This is another big one. KYB inherently involves handling sensitive information, such as identity data and financial records. Therefore, it’s crucial to be able to protect this information from unauthorized use in order to maintain the trust of (potential) clients and partners.
To maximize efficiency, a KYB software 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.
Of course, another very desirable feature of a software-based KYB system is its ability to automate repetitive tasks. This not only helps to avoid inevitable human errors from performing these tasks manually, but it also lightens the workload of compliance team members so they can devote more time to higher-priority work.
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. The company should also be able to scale the system to handle the volume of businesses it takes on as clients or partners.
When choosing the right software-based KYB system, 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. But 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.
Now that we’ve identified some of the essential includes in a KYB solution, which vendors deliver on them? Here are five popular options.
Best for: Wide-angle view of business and owner identities and risk factors
Middesk provides business verification and underwriting solutions that draw data directly from official U.S. government sources, including state Secretary of State offices. Beyond basic information, it also provides tax identifiers, international watchlist screening, industry categorization, registration document copies, web presence samples, litigation information, and more.
Through its integration with Socure, Middesk can also draw identity and risk information about businesses’ beneficial owners.
Best for: Flexible KYB options for conforming to risk appetites and client preferences
Ondato’s 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.
Ondato’s main downsides are that it’s somewhat expensive, and integrating it with a company’s existing systems can be tricky and take some time.
Best for: All-around business and individual ID verification
Canada-based Trulioo features identity verification functions such as ID document validation, business detail checks, and financial crime watchlist screenings. It has a global ID database that can recognize nearly 12,000 different types of ID documents, as well as over 5 billion individuals.
Where Trulioo falls short is in the risk assessment aspect of KYB. It doesn’t feature much in the way of behavioral or other contextual information that would help with assessing risk. It also doesn’t have risk scoring capabilities.
Best for: End-to-end identity verification and risk assessment for people and businesses
An up-and-coming KYB solution provider from Lithuania, iDenfy provides a comprehensive approach to identity verification and risk assessment. It offers a customizable platform that is able to verify over 2,500 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.
Although iDenfy has risk scoring capabilities, they aren’t as advanced as those of other KYB vendors; namely, they don’t query hardware or software details (i.e. device fingerprinting). And while iDenfy’s KYB approach is thorough, it also causes increased process friction. This can slow down the onboarding process and frustrate customers.
Best for: Comprehensive KYC solutions that can complement the KYB process
ComplyCube, from the UK, offers a thorough yet flexibly-costed identity verification platform. It can screen identities from sources such as credit bureaus, government agencies, commercial databases, postal and utility companies, mobile operators, and more. It can verify over 10,000 types of ID documents from across over 30 countries, and also features watchlist screening and some advanced forms of photo and video-based facial recognition.
Though ComplyCube can be used for KYB, its services are more geared towards KYC; it doesn’t have a dedicated, KYB-specific solution suite. The fullest set of KYB features only comes with the most expensive pricing plan, and sometimes costs extra money beyond that. Some users have also noted a lack of customization options.
In the world of business regulation, knowing who individual clients are isn’t good enough anymore. Companies that want to work with other businesses as customers or partners need to know that those businesses actually exist, are honest regarding what they are, and are operating within the law. Not only that, companies need to know the owners of those businesses are real people who are representing themselves truthfully and not involved in illegal dealings.
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 US state 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. Contact our team to get a hands-on demo.