{"id":173,"date":"2023-06-28T15:04:16","date_gmt":"2023-06-28T12:04:16","guid":{"rendered":"https:\/\/prod.ondato.com\/?p=173"},"modified":"2026-03-25T09:29:05","modified_gmt":"2026-03-25T06:29:05","slug":"know-your-business-kyb","status":"publish","type":"post","link":"https:\/\/ondato.com\/pl\/blog\/know-your-business-kyb\/","title":{"rendered":"What is the KYB Process? B2B Requirements, Steps, and Compliance Explained"},"content":{"rendered":"\n

If you plan to partner up with another business and sign a six-figure contract, you need to first ask yourself: How well do I actually<\/em> know this company? Behind a polished website and a professional LinkedIn page, there could be a legitimate enterprise or a complex web of shell companies designed to hide something darker.<\/p>\n\n\n\n

To make sure you\u2019re dealing with a clean and legitimate partner, you need Know Your Business (KYB) <\/strong>\u2013 a regulatory and risk management process that helps companies verify the legitimacy of other businesses before working with them. <\/p>\n\n\n\n

In this article, we\u2019re breaking down what the KYB process is, why it\u2019s non-negotiable in today\u2019s economy, and how you can implement it without losing your peace of mind or operational speed.<\/p>\n\n\n\n

What Is Know Your Business (KYB)?<\/h2>\n\n\n\n

Know Your Business (KYB) is a due diligence process used by organizations to verify the identity and legitimacy of other businesses they intend to work with. Similar to a deep-background check for companies, KYB is set to verify that a business exists on paper.<\/p>\n\n\n\n

KYB is about confirming a company\u2019s legal status, identifying who truly owns or controls it, i.e. who the Ultimate Beneficial<\/a> <\/a>Owners<\/a> (UBOs) are, and assessing whether that business poses a risk of financial crime, such as money laundering or fraud.<\/p>\n\n\n\n

EXAMPLE:<\/strong> Let\u2019s say you run a logistics company. A new firm, called QuickShip Inc., wants to partner with you. After a basic search, you find out that they have a legit-looking website. But a KYB check reveals that QuickShip Inc. isn’t registered in any national database, its listed office is a vacant lot on a dodgy street, and its owner is actually a shell <\/a>company<\/a> based in a high-risk jurisdiction. That\u2019s how a KYB check can save you from a massive legal and financial headache.<\/p>\n\n\n\n

As you can see, KYB is closely tied to Anti-Money <\/a>Laundering<\/a> (AML) and Counter-Terrorist Financing<\/a> (CTF) regulations. That’s why governments worldwide require financial institutions and certain regulated businesses to verify the identity of corporate clients before doing business with them.<\/p>\n\n\n\n

\"Know<\/a><\/figure>\n\n\n\n

Why is KYB Required for B2B Companies?<\/span><\/span><\/h2>\n\n\n\n

KYB is often viewed as an extension of Know Your Customer<\/a> (KYC). The reason behind it is that KYB is a much younger regulation. While KYC procedures were set for decades, businesses were not subjected to the same screening until recently, allowing fraudsters to exploit companies for illicit activities. <\/p>\n\n\n\n

In Europe, things changed in 2017 when regulators corrected the legal blind spot by specifying KYB in the 4th AML Directive. The updated regulation came a year after the US Financial Crimes Enforcement Network (FinCEN<\/a>) included KYB rules in Customer Due Diligence <\/a>requirements<\/a> for financial institutions.<\/p>\n\n\n\n

In the B2B sector, the participants are entities that can move large sums of money, which attracts fraudsters and money launderers. The United Nations Office on Drugs and Crime<\/a> (UNODC) has estimated that between 2% and 5% of global GDP<\/a> is laundered each year, which amounts to almost $2 trillion. Moreover, a recent survey showed that 79% of organizations were victims of payment fraud<\/a> attacks or attempts. <\/p>\n\n\n\n

Why Compliance Matters for Businesses<\/strong><\/h3>\n\n\n\n

First of all, knowing what’s behind a company’s corporate clients ensures authenticity and protection against corrupt or fraudulent business practices<\/strong>, such as money laundering<\/a> and terrorist financing.<\/p>\n\n\n\n

Second, it’slegal safety. <\/strong>Regulatory bodies like the Financial Action Task Force (FATF<\/a>), the EU’s AMLDs<\/a>, the US Bank Secrecy Act (BSA) set global standards that most countries include in their laws. So, ignoring these can lead to „cease and desist” orders or astronomical fines. For example, back in 2024, TD Bank agreed to pay a combined total of $3.09 billion to US authorities<\/a> for money-laundering activities that occurred as a result of failing to maintain an adequate AML program. <\/p>\n\n\n\n

Third, KYB compliance protects business reputation.<\/strong> Nothing kills a brand faster than being the „facilitator” for a sanctioned entity or a criminal network. More so, partnering with a high-risk or fraudulent entity can lead to frozen assets, regulatory investigations, and loss of customer trust. <\/p>\n\n\n\n

Finally, KYB ensures financial stability <\/strong>by preventing Business Email <\/a>Compromise<\/a> (BEC) and vendor impersonation \u2013 two of the leading causes of corporate financial loss today.<\/p>\n\n\n\n

Who Is Required to Perform KYB?<\/h2>\n\n\n\n
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The KYB process is necessary for more than just the financial services industry. According to the EU’s 5th AML directive, the following organizations, businesses, and individuals are subjected to the regulation:<\/p>\n\n\n\n