Corporate Know Your Customer (KYC) processes – sometimes referred to as Know Your Business (KYB) – are a subset of KYC that is focused on understanding corporate customers and their identities.
KYC and Corporate KYC form the foundation of Anti-Money Laundering (AML) protocols and regimes: the first step to preventing money laundering and other financial crimes is to have a clear and accurate view of the parties involved in financial transactions.
While KYC processes are designed to verify who an individual is before allowing them to access financial or other services with a money laundering risk, Corporate KYC is designed to first and foremost understand and verify aspects such as:
- Where a business is registered and active
- What kind of activity it is involved in
- Its relationships with other businesses, affiliates and subsidiaries
- Who its Ultimate Beneficial Owners (UBOs) and shareholders are
As a result of the multi-dimensional aspects that need to be taken into account as part of a Corporate KYC process, it tends to be more complex to carry out than individual KYC – and as a result, more difficult for in-house human compliance teams to realize.
This means that many smaller financial institutions and Virtual Asset Service Providers (VASPs) may not have adequate resources to scale into B2B relationships, ultimately limiting their prospects for growth and success.
In parallel, failing to adequately carry out effective Corporate KYC on corporate clients can lead to much higher levels of risk for businesses. These include being exposed to less obvious forms of financial crime, as well as money laundering networks that are processing fund amounts of an order that is much higher than those typically laundered through individual accounts.
These issues make the need for effective, efficient and affordable Corporate KYC processes even more pressing in today’s stringent national and global regulatory environments.