As compliance obligations continue to tighten across industries and jurisdictions, business legitimacy checks have become central to AML compliance workflows. From banks and fintechs to B2B platforms and professional services, businesses across sectors are expected to screen the entities they work with, not only to stay compliant but to avoid onboarding risks that could escalate quickly.
This guide walks you through a comprehensive list of risk factors you should check to confirm a company’s legitimacy, with assistance from intelligent, automation-driven, powerful KYB platforms like Ondato.
What Does It Mean for a Business to Be Legitimate?
A company that is legit will meet clearly defined legal and regulatory standards. It is formally incorporated in a recognized jurisdiction and listed in an official registry with a valid company number, such as a business registration number or tax identification number. The company’s registration must also be active and current, with no signs of dormancy or dissolution.
Along with formal incorporation, the business must have established a trustworthy reputation. Its actual activities must reflect the industry that the business claims to operate in. And it should hold any industry-specific license(s) that its operation demands.
To summarize, a legitimate business is one that presents itself as a consistent and verifiable entity across regulatory, operational, and public records.
Do You Need to Check If A Company is Legitimate, And Why?
Verifying the legitimacy of a business is critical for organizations that must comply with Know Your Business (KYB) and Anti-Money Laundering (AML) regulations. These laws bear high importance particularly in jurisdictions governed by FinCEN and the EU’s AML directives, but also in countless global contexts.
- Banks, financial institutions, and crypto exchanges are legally required to screen entities before onboarding since they deal directly with massive volumes of money. Handling such funds can bring major risks of financial crime such as money laundering, tax evasion, fraud, and terrorist financing.
- Similarly, insurers and fintech lenders assess legitimacy to reduce exposure to financial crimes facilitated by corporate clients.
- B2B marketplaces and procurement platforms rely on KYB verification to avoid engaging with fraudulent or unreliable suppliers.
- In many other highly regulated industries, such as telecom, gambling, and legal services, valid licensing is a must-have.
- Investors, VCs, and acquirers conduct due diligence to get ahead of potential risks in ownership or unfavorable litigation history.
- For e-commerce platforms and services with age restrictions or other strict usage policies, verifying the identity and authority of the business and its representatives is essential.
Across all the different sectors and contexts, the main goal stays the same, which is to fulfill KYB compliance while maintaining a frictionless onboarding process.
Key Pieces of Information to Verify for KYB Compliance
Let’s start with the essentials. Registration data, licensing details, tax identifiers, and address verification form the foundation of a legitimacy check. These baseline indicators help ensure the company exists where it claims to, operates within regulatory boundaries, and can be traced across official records.
Business Registration and Company Number
One of the first steps in confirming a company’s legitimacy is verifying its business registration and company number. Start by checking whether the business name matches what appears in an official registration database. With a platform like Ondato, this process becomes more efficient by aggregating verified registration data across jurisdictions.
You should also review the registration date, current status (such as Active), and the legal address on file. Make sure the company code is valid and consistent across multiple official sources. For a thorough check, make sure you request registry-based company information that includes all relevant documentation and supporting data.
Tax Identifiers
A legitimate company’s tax identifiers will always align with its registered details. Verify that the Employer Identification Number (EIN), Taxpayer Identification Number (TIN), or Legal Entity Identifier (LEI) matches the company name and appears correctly in any official records.
Always cross-check these identifiers against verified registry information to catch any inconsistencies early on and avoid onboarding risks.
Licensing Information
When determining a business’s legitimacy, you need to ensure that it holds any necessary sector-specific license(s) that it is legally required to.
For example, a business operating in a highly regulated industry such as finance, telecom, or insurance must possess the necessary license to prove that it is authorized to conduct the operations that it does.
Look for licensing data where available, and make sure to flag any missing or incomplete documentation during the verification process so that you can maintain a clear and auditable compliance trail.
Physical Addresses
A key part of verifying a company’s legitimacy is checking its legally registered address against a real, physical location. It’s important to confirm that the company’s address isn’t just a virtual office or a known shell company.
Have your system validate this info by pulling geo-data and mapped locations. It should also flag high-risk address types, such as PO boxes or locations linked to known scams, to make it easier to spot discrepancies before onboarding.
Official Listings
Another important part of confirming whether a company is legitimate is checking its presence in official registries such as official government databases, Companies House records, industry-specific directories, or other key listings.
Instead of relying on time-consuming manual searches, consider using a platform like Ondato that helps retrieve and organize verified company information from multiple sources. Automated workflows can simplify access to registry data and help ensure you’re reviewing the most relevant and up-to-date entries available at the time of verification.
Third‑Party Data
Third-party data sources can offer helpful context, but they shouldn’t be used as the primary basis for establishing legitimacy.
Platforms like the Better Business Bureau or Glassdoor, for instance, reflect general public perception and opinion rather than legal or regulatory standing. There are plenty of other sources for relevant external data, too. For a more complete picture, some organizations use optional third-party databases that may include credit scores or access to financial statements. These would likely all require separate tools beyond your KYB platform, though.
Beyond the Basics: Advanced Checks for Legitimacy
Once the basics are checked off your list, the next step is deeper due diligence. Here, you’ll verify ownership transparency, representative authority, and screen for broader risk indicators like sanctions, litigation history, or hidden control structures. These advanced checks help expose liabilities that standard registry data might not be able to on its own.
Ultimate Beneficial Owner (UBO) and Ownership Structure
Verifying a company’s legitimacy also involves understanding who actually controls it and has a major say in its operations. This means identifying individuals or entities within the organization with significant ownership, voting rights, or influence.
Ondato connects registry and UBO data across jurisdictions to present clear corporate ownership logic. This makes it easier to detect nominee shareholders, layered subsidiaries, or offshore holding companies that might otherwise go unnoticed. If there’s a change in the ownership structure or a new UBO is added, Ondato’s continuous monitoring system issues an alert. High-risk or complex profiles are automatically flagged through risk scoring, prompting additional due diligence if/when necessary.
Authorized Representatives and Roles
A legitimate company should have clearly identifiable representatives whose roles and authority are easy to verify. This includes validating the names, positions, and appointment dates of directors, secretaries, or other key members.
With Ondato, you can access this information along with countries of residence and correspondence addresses, helping you spot inconsistencies or red flags. Key details of representatives are also synced with KYC identification workflows, allowing seamless verification. Using AI-enabled spoofing checks based on document and biometric analysis, Ondato can detect fake or altered identity information during KYC processes.
Risk Screening
Legitimacy checks should always include comprehensive risk screening, where organizations and their UBOs are more aggressively vetted for potential exposure or connection to financial crime, political influence, regulatory violations, and reputational red flags.
With Ondato’s reliable KYB platform, you can automatically screen both the company and its UBOs against global sanctions databases, politically exposed person (PEP) lists containing over 16 million profiles, and adverse media sources.
If a risk profile changes, such as due to a new sanction being imposed or negative news being published, real-time alerts are triggered.
Companies are segmented by risk level, allowing higher-risk profiles to be routed through enhanced due diligence.
Ondato can also apply Stoplist logic to block entities or individuals previously flagged for fraud. This is done using document and biometric data captured during the identity verification steps in the onboarding flow.
Litigations, Bankruptcies, and Other Hidden Risks
A company may appear legitimate in registries but still carry serious yet concealed financial or legal risks. That’s why it’s a good idea to check corporate credit databases and public filings for signs of bankruptcy, civil litigation, or similar.
If a business is involved in legal action or has filed for bankruptcy, for instance, it should be flagged immediately. This will shield you from being exposed to hidden liabilities and allow you to make more informed decisions before entering into any agreement with a business presenting higher legal risk or financial instability.
While these checks can reveal serious issues, they may not show up in a standard KYB check because KYB solutions typically focus primarily on registration and ownership verification. For complete legal and financial history, you might need to use additional third-party tools on top of your KYB platform.
Internet Presence
A company’s digital footprint can offer useful supporting evidence during legitimacy checks.
Make sure you find signs of a genuine operational presence. Cross-reference the business’s official website domain with registry information. You can use third-party online tools to fetch and analyze signals such as domain age and SSL certificate status, too. Fake or negative reviews, unfavourable news mentions, or a dubious or non-existent social media presence should raise red flags. You can also compare the registered address with the business’s presence on Google Maps or other business directories to help identify inactive or ghost storefronts.
While not definitive on their own, these digital signals can help flag inconsistencies pointing to potentially fraudulent operations.
Typical Verification Workflow: Manual vs Automated KYB Checks
Manual business verification is often inefficient and fragmented. It might require navigating through tens if not hundreds of different registries, downloading tons of documents, maintaining extensive spreadsheets, relying on credit bureau subscriptions, and manually mapping UBOs. The process would naturally be time-consuming, costly, and highly prone to errors and inconsistencies.
With a platform like Ondato, which offers varying levels of intelligent automation, you can streamline your KYB process into a fast, automated workflow. Ondato also supports flexible integration modes to suit different onboarding flows.
A typical automation-assisted KYB verification check with Ondato would look like this:
1. Enter the company name. An instant search returns verified details, including registration status, legal address, and company code.
2. The KYB form is either pre-filled using registry data or completed by a representative via a secure, dynamic form.
3. Ondato automatically performs registry lookups, extracts documents, maps ownership structure, and runs ID verification on representatives.
4. The system conducts AML, PEP, and adverse media screening, all within the platform, alongside document validation.
5. A real-time dashboard displays verification progress, flags rejections, and supports API integration or webhook notifications.
The entire process, from the first input to the final decision, can take as little as 30 seconds per business.
Last Thoughts
A legitimate business isn’t just a name in a registry. It has verifiable incorporation data, consistent tax identifiers, proper licensing, transparent ownership, a low-risk profile, and an authentic online presence. These signals can combinedly reduce your risk and keep your organization aligned with compliance requirements.
Manual verification might partly get you there, but it’s slow, fragmented, and increasingly inadequate for today’s AML compliance requirements. That’s where a platform like Ondato can help, with unified registration checks, UBO mapping, representative KYC, ongoing monitoring, and risk screening.
By consolidating all key aspects of a business legitimacy check into a single KYB workflow, Ondato allows you to move faster without missing critical risk signals.Start verifying businesses quickly, confidently, and compliantly. Try Ondato’s business verification service for free or sign up for a quick demo to see it in action.
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