Know Your Business (KYB): what it is & why it matters?
- azakaw
- Oct 1
- 10 min read
Updated: 4 hours ago
Do you really know who you are doing business with? Beyond the registration documents lies a complex web of influence that standard checks often miss. This is where Know Your Business becomes critical.
In today’s regulatory landscape, mastering KYB is the difference between a secure partnership and a multi-million dollar oversight.
What is KYB?
KYB (Know Your Business) is a mandatory due diligence process used by organizations to verify the identity and legitimacy of the legal entities with which they do business.
KYB goes deeper into corporate structures to identify Ultimate Beneficial Owners (UBOs), risk profile, and legal standing.
In short, KYB ensures you aren't unknowingly facilitating financial crime through shell companies or complex ownership chains.
Who needs to comply with KYB regulations?
KYB compliance is mandatory for any entity establishing a business relationship with a legal entity. Key sectors include: finance, digital assets, and professional services.
Financial institutions
Banks, payment institutions, electronic money institutions, investment firms, and insurers are required to apply KYB under national AML and counter-terrorist financing laws that follow international standards set by the FATF (Financial Action Task Force).
This applies across the EU, the United States, and the United Arab Emirates, regardless of whether the business operates through traditional banking models, fintech platforms, or cross-border operating structures.
The common objective is straightforward: to prevent legal entities from being used to hide who really owns or controls them.
Enforcement actions across these jurisdictions show a consistent pattern.
Problems arise when firms rely on basic company registration checks rather than proper business verification, fail to identify ultimate beneficial owners, or do not properly understand how control and funds move through the business.
These gaps are often structural rather than intentional, arising from limited visibility across ownership layers and a lack of centralised KYB workflows.
Fintechs, crypto platforms, SaaS, marketplaces
Fintech companies, crypto asset service providers, and large digital platforms are increasingly falling within AML and counter-terrorist financing regimes due to their operational structures.
Where a platform enables payments, onboards businesses at scale, or sits between multiple corporate counterparties, regulators expect it to understand who its business customers are and who ultimately controls them.
For crypto platforms in particular, KYB onboarding for corporate clients is no longer optional.
In Europe, the United States, and the United Arab Emirates, these firms are expected to apply the same KYB due diligence standards as traditional financial institutions, regardless of how the service is delivered or where the technology stack is located. (Ultimate Beneficial Owner verification, risk assessment, and ongoing monitoring)
AMLD6 (Directive 2024/1640) strengthens EU enforcement by expanding scrutiny over high-risk sectors, such as crypto, real estate, and high-value goods, building on the foundations of AMLD5.
DNFBPs (Designated Non-Financial Businesses and Professions)
Designated Non-Financial Businesses and Professions (as defined in FATF Recommendations 18 and 23) are subject to KYB obligations when establishing relationships with corporate clients.
When we talk about DNFBPs, it includes:
lawyers
notaries
accountants
trust and company service providers
casinos
dealers in precious metals and stones
real estate professionals
Across major regulatory regimes, these sectors are brought into scope because of the functions they perform, not the labels they carry.
Their involvement in company formation, ownership structuring, asset transactions, and the movement or holding of value places them in a position where weak KYB controls can enable misuse of legal entities.
As a result, regulators expect these professionals to apply corporate due diligence standards comparable to those used by financial institutions, adjusted for risk but not diluted by professional status.
What are the main KYB requirements?
The main KYB requirements are company verification, UBO identification, screening, proof of incorporation and business documents, and ongoing monitoring.
KYB requirements are not arbitrary. They are defined by regulation, supervisory guidance, and international standards.
Company registration verification
The first step in business verification is to confirm the entity's legal existence.
This includes confirming:
Registered name and legal form
Registration number
Jurisdiction of incorporation
Registered office and principal place of business
Official company registries, commercial databases, and government sources are used to validate this information.
UBO identification and ownership checks
Identifying the UBO is a core element of KYB.
International standards require firms to look beyond the legal entity itself and determine which natural persons ultimately own or control the business, most commonly through ownership or voting rights, but also through less direct forms of influence.
This requirement is central to what KYB means in banking, as institutions are expected to understand not just the customer entity, but the individuals behind it.
Where ownership is layered through holding companies, trusts, or nominee arrangements, UBO identification becomes more than a formality and often triggers enhanced due diligence.
At this stage, manual processes struggle to keep pace with the depth and frequency of analysis regulators now expect.
The new AMLD6 reinforces this direction by going beyond formal shareholding thresholds, focusing more directly on ultimate control, strengthening expectations around the quality and timeliness of UBO information, accelerating update deadlines, and allowing lower ownership thresholds for higher-risk customers (entities).
Taken together, these changes form part of the wider EU AML Package’s push for greater transparency and a more enforceable framework that makes complex ownership structures harder to use as a shield against scrutiny.
PEP and sanctions screening
All identified UBOs, directors, and authorised signatories must be screened against sanctions lists and politically exposed persons databases. This includes domestic and foreign PEPs, as well as family members and close associates, where required.
Sanctions regimes are dynamic rather than static. Lists change, designations are updated, and enforcement expectations assume that firms maintain screening throughout the business relationship rather than confining it to onboarding.
Read also: The best sanctions screening software
Proof of incorporation and business documents
KYB onboarding requires documentary evidence.
For many organisations, this section answers what documents are required for KYB. Typical documents include:
Certificate of incorporation or registration
Articles of association or equivalent constitutional documents
Shareholder registers
Board resolutions authorising the relationship
Evidence of business activities and purpose
The exact document set varies by jurisdiction and risk level.
Ongoing monitoring and audits
KYB does not end at onboarding.
Institutions are expected to monitor business relationships on an ongoing basis, ensuring that information stays accurate and risk assessments remain relevant, with any material changes in ownership, control, activity, or geographic exposure triggering a KYB review and, where appropriate, enhanced due diligence.
This ongoing monitoring is closely linked to audit and supervisory expectations.
Regulators assess not only whether risks are identified but also whether firms can demonstrate how KYB decisions are reviewed, updated, and supported by clear audit trails.
Ongoing monitoring and audit controls, therefore, work together to ensure that KYB assessments remain accurate and defensible beyond initial onboarding.
Maintaining this level of oversight over time is difficult without systems that can consolidate business information, track changes, and preserve a clear audit trail.
Where these controls identify unusual activity or material changes that cannot be reasonably explained, organisations are required to report the matter to the relevant authority.
Systems such as goAML are used at this stage as the formal reporting channel.
KYB vs KYC: what’s the difference?
Legal entities vs individuals
In practice, KYC involves confirming who a person is, checking their identity documents, and screening them against sanctions and politically exposed persons lists, and understanding why they are using a particular service.
KYB applies to legal entities. KYB is not just about checking that a company is real. It is about understanding who actually sits behind the business, how ownership and control are set up in practice, and whether the relationship poses risks that need closer attention.
This means identifying the people who ultimately benefit from or control the company, making sense of complex ownership structures, checking those in positions of authority, and keeping an eye on how things change over time.
This distinction is central to KYB vs KYC, as businesses introduce layers of ownership and control that do not exist in individual onboarding.
Related content: Why KYC is important in banking
Why do businesses require deeper due diligence?
Corporate structures can be used to obscure beneficial ownership and launder illicit funds. As a result, regulators require deeper analysis and corroboration from multiple sources for KYB than for standard KYC.
KYB failures are rarely technical. They usually reflect insufficient understanding of ownership and control.
How does the KYB process work?
Typical onboarding workflow
A standard KYB onboarding process includes:
Collection of corporate information and documents
Verification against official and independent sources
Identification and verification of UBOs
Sanctions and PEP screening
Risk assessment and approval
Ongoing monitoring setup
Each step must be documented and auditable.
What documents are needed for KYB?
Documents required for KYB depend on jurisdiction and risk profile, but commonly include:
Incorporation certificates
Corporate structure charts
Shareholder and director registers
Identification documents for UBOs
Proof of business address
Evidence of operational activity
For high-risk cases, an additional source of funds or source of wealth documentation may be required.
Manual vs automated KYB
Manual KYB processes become increasingly fragile as complexity grows.
International ownership chains, frequent changes in control, and rising regulatory expectations make spreadsheet-driven or document-heavy approaches difficult to sustain and easy to challenge.
Well-designed automated KYB solutions address these pressures by centralising business verification, ownership mapping, screening, and ongoing monitoring in a single workflow.
This reduces duplication, improves consistency across teams, and keeps a clear audit trail over time.
When appropriately implemented, automation strengthens oversight and defensibility while leaving accountability and judgment firmly with the compliance function.
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Common challenges in KYB compliance
Complex ownership structures
Multi-layered ownership chains across jurisdictions complicate UBO identification and increase the risk of oversight.
Incomplete or outdated data
Company registries are not always up to date, particularly in certain jurisdictions. Reliance on stale data exposes institutions to compliance failures.
International verifications
Cross-border KYB introduces legal and linguistic challenges. Standards vary significantly between jurisdictions.
High operational cost
Without technology, manual KYB tends to turn into a significant operational burden.
Teams spend large amounts of time on manual data collection, repeated document requests, and fragmented verification steps, especially where ownership structures are complex or cross-border.
As onboarding volumes grow, these processes often scale by adding people rather than improving efficiency, driving up cost while increasing the risk of inconsistency and error.
How to stay KYB compliant
Create a KYB policy
Effective KYB starts with having something everyone can fall back on when decisions get difficult.
A documented framework gives teams an anchor. It sets out who owns KYB decisions, how risk is weighed, when enhanced due diligence is expected, and what happens when something does not look right.
Without that clarity, outcomes start to depend on who is handling the case and how much pressure they are under. With it, decisions hold together over time and across teams.
Use technology platforms for verification
As KYB obligations expand in scope and complexity, technology plays a practical role in maintaining consistency and control.
Platforms that centralise business verification, UBO identification, screening, and ongoing monitoring can improve traceability and audit readiness.
This is where solutions like azakaw are typically deployed, not to replace judgment, but to make KYB decisions consistent, reviewable, and defensible over time.
End-to-End Compliance Platform
Onboard businesses in minutes using our AI tools. Verify businesses, directors, and ultimate beneficial owners and manage KYB refreshes through a single platform.
Maintain clear records and perform periodic reviews
Documentation is critical. Regulators assess not only what decisions were made, but how and why they were reached.
Firms are expected to keep clear, accessible records of the information relied upon, the risk assessments performed, and the reasoning behind onboarding and ongoing monitoring decisions.
FAQs
Who is responsible for KYB within an organisation?
Responsibility for KYB typically sits with compliance, financial crime, or risk functions, while ultimate accountability rests with senior management.
Is KYB mandatory or just best practice?
For regulated entities, KYB is not optional. It is required under national anti-money laundering and counter-terrorist financing frameworks that give effect to international standards issued by the Financial Action Task Force.
While the legal form and supervisory authority vary by jurisdiction, the underlying expectation is consistent: regulated firms must understand with whom they are doing business and who ultimately owns or controls that business.
What is the difference between KYB and KYC?
KYC applies to natural persons. KYB applies to legal entities.
While the principles are similar, KYB requires additional layers of analysis, including ownership and control structures, UBO identification, and assessment of how the business operates.
Treating KYB as an extension of KYC is a common source of compliance failure.
Can KYB be automated?
Yes, parts of the KYB process can be supported by technology, particularly where consistency, scale, and traceability are critical.
Systems that centralise business data, map ownership structures, and support screening and ongoing monitoring reduce manual effort and make controls easier to apply and evidence over time.
What happens if KYB is inadequate?
Weak KYB exposes organisations to regulatory enforcement, remediation programmes, reputational damage, and, in some cases, criminal liability.
Under the Sixth Anti-Money Laundering Directive (AMLD6), these risks are heightened, as the EU framework expands predicate offences, extends corporate liability, and introduces harsher penalties for failures to meet Know Your Business obligations.
KYB as a strategic compliance tool
KYB is often described as a regulatory requirement, but in practice, it is something more revealing.
It shows whether an organisation actually understands the businesses it chooses to work with, or whether it is relying on surface-level checks and inherited assumptions.
Where KYB is weak, exposure to financial crime, regulatory challenge, and reputational damage tends to follow.
Organisations that treat KYB as something that continues after onboarding, rather than a hurdle to clear, are far better placed to manage risk over time.
Improving a KYB process comes down to consistency and visibility, both of which become difficult to sustain as scale and complexity grow.
Tools that support automated KYB workflows, ownership mapping, and ongoing monitoring help maintain oversight without turning compliance into an operational bottleneck.
Used properly, platforms like azakaw support professional judgement by making it easier to apply it consistently and to demonstrate it clearly when scrutiny arrives.
Key takeaways about KYB (Know Your Business) |
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