In the world of compliance, ‘know you customer’ (KYC) checks first came into force to stop the flow of profits from crime before know your business was ever in place. Regulated businesses were required to maintain a system of verifiable information about each customer’s identity and to ensure their customers were, indeed, who they claimed to be.
However, at the same time, regulated businesses were not required to identify the stakeholders and beneficiaries of the businesses that they had relationships with. As criminals are shrewd, it did not take them long to start using businesses to conceal their identities behind corporate identities and better hide their money laundering efforts.
This gap was fixed in 2016 by FinCEN with the “Customer Due Diligence Requirements for Financial Institutions,” and a host of regulation that came after. Most recently, the 5th Anti-Money Laundering Directive put a substantial focus on the importance of ‘Know Your Business’ processes and the 6th directive increases the financial and personal punishments for non-compliance.
In essence, regulated businesses have an obligation to ‘Know their businesses’ as well as they ‘know their customers’.
Both KYC and KYB checks have always had the same objective – to fully understand the risk that new and ongoing business relationships pose. To understand the risk of a business entity, money laundering reporting officers (MLRO’s) need to know the people responsible for the business, as well as the people who ultimately benefit from that businesses activity, ultimate beneficial owners (UBO’s). They need to know if the business, or the people in the business have been sanctioned, and if so by whom. They need to understand the political network and potential exposure to corruption that individuals running corporations have, and they need any adverse media that surrounds the business.
Only when the picture is complete, and all the information is in hand, can a risk assessment be undertaken – And this is where finTech businesses step into the picture.
Where Do W2 Come In?
The W2 Know Your Business service ensures that businesses are meeting regulatory requirements by helping you understand the businesses you are working with. W2 provides access to more than 150+ million companies across the globe; and thanks to our real-time global register network, we can provide access to verified business data that can be easily integrated into your internal workflows.
While company documentation differs from country to country, we aim to cover the essentials for a complete and thorough KYB due diligence process.
W2’s KYB solution provides continuous support in the fight against fraudulent activity by conducting one off checks and ongoing screening to identity high-risk businesses in real-time.
If you or your business would like to know more about Know Your Business (KYB) or any of W2 products, contact us here.