Businesses with internal processes, transactions, and payments involving large sums of money are constantly at risk of becoming fraud victims. Digital KYB solutions are now being incorporated by businesses to improve productivity and secure their business collaborations.
Similar to the widely implemented KYC (know your customer) solutions in banks, digital KYB solutions also provide verification measures. In KYB, however, it’s the collaborative businesses, vendors, and suppliers that are verified. This is because third-party vendors often turn out to be shell companies aiming to damage businesses.
What are Digital KYB Solutions?
In order to prevent unfortunate business collaborations that end up damaging the reputation of companies, business verification solutions are emerging. These verification procedures are of particular interest because of the increasing fraud risks brought by fake vendors and other business entities.
Global authorities encourage businesses to implement digital KYB solutions to verify the business that they aim to collaborate with. KYB checks allow businesses to get better insights into the credibility and authentic stature of their potential business partners. These include the verification of characteristics like registration numbers and jurisdiction codes of the respective business.
How Digital KYB Solutions Work
Know your business process uses technologies like AI to gather and analyze detailed information, monitor trends and find out suspicious activities. The stakeholders, beneficial owners, and relationships of the potential corporate entity are verified. Also, the addresses, company types, and trademarks are the key points to determine the legitimacy of businesses.
Due Diligence
Just like the customer due diligence process in KYC authentication, KYB also implements the due diligence of businesses to calculate the risks. High-risk business entities are also subject to enhanced due diligence.
AML Screening
AML (Anti-money laundering) screening is carried out to determine whether particular entities linked to the business are involved in acts of illicit money transfers. The top management and other stakeholders are screened against global watchlists to confirm the legitimacy and fairness of a business system.
High-risk businesses are the ones that employ individuals linked to political parties (PEPs) as well as people with past criminal records.
AML Compliance Obligations
Law enforcers in various regions constantly update the AML compliance obligations considering the rise in financial crimes. This process began with the Bank Secrecy Act in 1970 in order to prevent tax evasion. The concept is based on attaining reports of customer activities from banks indicating transactions of a certain amount.
Automated Verification Solution
Increasing demands for automation in digital businesses are making it difficult for some companies to keep up with the pace. The commonly used traditional verification techniques were not convenient for the customers. The manual verification of businesses took up a lot of valuable time because large amounts of data had to be searched one by one.
For these reasons, organizations simply skip the verification and just focus on development. Now, automated verification with the help of AI in machine learning algorithms helps companies considerably reduce the time taken for verification. In addition, the security and privacy of business transactions can be ensured with automated digital KYB solutions.
Benefits of Digital KYB Solutions
All organizations involving transactions, payments, or any financial processes require top-notch security measures to protect sensitive customer information. In order to combat the increasing number of frauds and money laundering cases, sufficient KYB solutions are the need of the hour. These instances of money laundering make businesses pay heavily in compliance fines.
Digital KYB solutions are the much-needed security measure to prevent business frauds and comply with AML and kyc regulations at the same time. Government authorities and AML regulators push businesses to incorporate KYB regulations and run background checks including the relationships of that business with its vendors and suppliers.
Shell companies purposely damage businesses in order to fulfill their own illicit motives. This results in legitimate businesses getting blacklisted by becoming victims of manipulation. Lack of verification systems is one of the many loopholes in business systems, leading them to shutdowns. Even when the companies are verified to be legitimate, the employees within their system can also turn out to be corrupt.
Corruption ruins businesses like any other system when employees knowing the confidential information come up with criminal motives. In addition to the losses and fines, businesses lose customer trust and their reputation gets permanently stained.
Final Thoughts
To summarize the above-mentioned points, it’s safe to say that businesses are at risk internally and externally without sufficient verification processes. Therefore, avoiding losses and preventing fraud is only possible with efficient digital KYB solutions. These services help businesses add value and get customers to trust the organization.
