What is KYB and how is it done for businesses in India?

KYB onboarding assists AML- regulated companies to comprehend and analyze if their partners, customers, or vendors are

• Displaying financial terrorists or money laundering risks

• Involved in any illegal financial activity

• Subject to any regulatory actions

Various regulatory institutions like European Banking Authority (EBA) and FATF mandate companies to verify and identify their documents and UBOs according to the guidelines.

This procedure is enormously beneficial for businesses because it enables them to be with law enforcement and get adequate support whenever they report any suspicious activity or fraud.

In order to get the best help companies also need to provide any and all information that they hold on their customers and the activities they think are suspicious.

If a company provides inadequate or no CDD (customer due diligence) this is considered to be an AML regulation violation.

This means that the company has proceeded to work with corporate customers without performing the necessary due diligence, which obviously in turn puts the company at risk of dealing and involvement with money laundering or financial illegal activity. 

KYB is a company’s protective cover against any kind of fraud or illegal breaches done by any of its patterns, customers, or vendors.

It effectively helps in reducing money laundering, terrorist financing, and reputational risks. Fraud can easily happen to any business. 

Financial fraud and money laundering scams can easily enter any business. For example, some fraudster is able to get their hands on the information of a company that has been dormant for a while.

They would rename it and start placing orders in the name of that company with the suppliers and they basically do not intend to pay for the supplies.

Before you catch hold of this scheme the fraudster would already be gone. This is why it is absolutely necessary for any company to notice any of the following red flags

• Unlike company office and shipping address

• No solid company credit record

• The official documents of the company have errors and mistakes

• Ownership of the company has been highly dynamic and changes frequently

While filing for a KYB verification, a company is required to have all these documents

• Legal address

• Postal address

• Registration number 

• Tax number

• Bank account verification

• Credit reports

This significantly reduces the risk of collaborating with any company which can open your business to financial frauds and money laundering scams. 

Ultimate Beneficial Owners (UBOs), representatives, and shareholders are all needed to go through a KYC verification process in the system. There are multiple automated KYC options available that can be put out for them.

Along with the Identity verification, UBOs, representatives, and shareholders are also required to pass the liveness check and screening against different watchlists like sanction lists, PEPs lists, adverse media, etc.

Moving forward in the process, the company is also required to assess and file all its assets and liabilities to properly evaluate the risk which can be posed due to fraud.

It is important for any company to have a clear view of the value of its assets and business type. 

AML screening consists of scanning all the legal entities and individuals connected with the business against any global sanctions, PEP lists, global watchlists, etc.

This screening process works in more than 190 countries. When nothing questionable is found, the company is termed to be green. If otherwise, any suspicious detail would be regarded as potential fraud.