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Know Your Business (KYB), once overshadowed by its consumer-focused counterpart, Know Your Customer (KYC), is rapidly emerging as a critical tool for compliance and risk management in the world of business-to-business (B2B) relationships. As global regulatory requirements become increasingly stringent, KYB is now taking center stage, helping financial institutions and corporations ensure that they understand who they are doing business with. This article examines recent trends in KYB, explores global developments in beneficial ownership regulations, and highlights how Gratify is redefining KYB processes to enhance compliance and reduce fraud.
With the complexities of B2B interactions growing, KYB has become essential for proper due diligence. Regulatory authorities such as the UK’s Financial Conduct Authority and the European Banking Authority are requiring more detailed investigations into business entities, prompting companies to understand who truly controls the firms they onboard. Corporate structures often obscure the real beneficial owners, making the onboarding process particularly challenging for fintech companies that must comply with anti-money laundering (AML) and counter-terrorism financing laws. Identifying Ultimate Beneficial Owners (UBOs) remains a significant challenge due to diverse definitions across jurisdictions and fragmented access to UBO registries.
In March 2023, the Financial Action Task Force (FATF) updated its guidelines on beneficial ownership, emphasizing a "multi-faceted strategy" to ensure transparency. Countries are encouraged to provide timely, precise, and up-to-date information on the beneficial owners of legal entities. The European Parliament has also taken significant steps to strengthen these requirements. On April 24, 2023, it announced plans to lower the ownership threshold from 25% to 15% for most companies, with a further reduction to 5% for high-risk sectors, such as extractive industries. These changes are intended to curtail the use of the financial system for money laundering and terrorist financing.
In the United States, the implementation of the Corporate Transparency Act in 2021 set the foundation for a UBO register, with full rollout expected by January 2024. This development is aimed at increasing transparency around business ownership and combating financial crime. Australia and Canada are also preparing to introduce similar beneficial owner registers.
KYB has emerged as a cornerstone of effective risk management. According to a 2022 PYMNTS study, companies that adopted advanced KYB technologies reported a 34% reduction in fraud-related losses compared to those relying on outdated systems. This highlights the growing importance of KYB in combating fraud and managing risk effectively. The KYB market, valued at $150 million in 2020, is projected to reach $533 million by 2030, driven by innovations like AI and biometrics.
KYB is no longer seen as an isolated process; it is now an integral part of broader compliance strategies that combine corporate verification and risk screening. This integration provides a more holistic view of potential financial risks. Advanced orchestration in KYB—which may include techniques such as digital forensics, ID verification, and behavioral analytics—helps target fraudulent actors while simplifying processes for legitimate customers. This move towards a comprehensive risk management approach allows businesses to create efficient and seamless onboarding experiences.
Gratify is leading the transformation in business onboarding with its innovative KYB solutions. These solutions are designed to provide compliance officers with an easy-to-use, all-in-one platform that enhances compliance, reduces fraud, and streamlines business verification.
Gratify’s KYB solution performs exhaustive screenings against AML, sanction, PEP (Politically Exposed Persons), and adverse media lists, ensuring compliance with global standards. The platform's automated approach, supported by compliance professionals like Money Laundering Reporting Officers (MLROs), provides an extra layer of scrutiny to maintain data integrity.
Gratify also offers reusable KYB, which eliminates the need for businesses to repeatedly submit information for each new transaction or partnership. This feature ensures that once a company is verified, its data is securely stored and easily accessible, making the onboarding process for subsequent transactions much quicker. Stored information is re-verified to maintain compliance, offering both efficiency and security.
With Gratify’s Perpetual KYB, businesses benefit from continuous monitoring. Once a company is onboarded, Gratify performs automated and regular checks against sanction lists, PEPs, and adverse media sources. This proactive approach ensures ongoing compliance by identifying and addressing any emerging risks in real-time, helping companies stay ahead of potential issues.
The rise of KYB represents a significant shift in how businesses approach compliance and risk management in an increasingly interconnected world. With evolving global regulations and the increasing need for transparency, companies must adopt sophisticated KYB solutions to effectively manage risk and stay compliant. Gratify is at the forefront of this transformation, offering advanced KYB technologies that simplify onboarding, enhance compliance, and reduce fraud. By leveraging tools like reusable and perpetual KYB, businesses can foster safer, more reliable partnerships while navigating the complex landscape of modern financial regulations.
