Know Your Business
What is Know Your Business?
Know Your Business (KYB) is the process a regulated firm runs on a corporate customer to confirm that the company exists, who owns it, and what it actually sells. It examines company registration data, ownership structure, licensing, and the nature of the business activity, rather than the identity of a single individual.
Banks, payment providers, and marketplaces run KYB before opening an account and repeat it at intervals afterwards. The output is a risk rating that determines whether the relationship is accepted, accepted with conditions such as reserves or volume caps, or refused. KYB obligations sit inside the same framework as customer-level checks, and supervisors treat a thin KYB file as a control failure rather than a paperwork gap.
KYB is the legal-entity counterpart of . KYC verifies a natural person; KYB verifies the entity first, then applies identity checks to the individuals standing behind it.
Key requirements
- Entity verification – legal name, registration number, incorporation date, and registered address, matched against the official company register in the jurisdiction of incorporation.
- Ownership structure – the chain of holding companies and shareholders, mapped until a natural person is reached.
- identification – individuals holding 25% or more of shares or voting rights count as beneficial owners under the FinCEN Customer Due Diligence Rule in the US and under EU anti-money laundering law, and their identity is verified against an official document.
- Screening – the entity, its owners, and its directors are checked against sanctions lists, politically exposed person lists, and adverse media.
- Business activity – what the company sells, in which markets, and through which channels. This drives the assigned at boarding, which in turn affects interchange and underwriting risk.
- Ongoing monitoring – scheduled refresh of the file, plus event-driven review when ownership, licensing, or transaction behavior changes.
Who it applies to
KYB obligations fall on firms that hold or move money for business customers:
- Banks and electronic money institutions opening business accounts
- and payment providers boarding merchants
- Marketplaces and platforms paying out to third-party sellers
- Lenders, crypto service providers, and providers operating under a partner's licence
Scope isn't uniform across markets, because anti-money laundering law is transposed nationally and the triggers differ. A group operating in the EU, the UK, and the US typically applies the strictest applicable standard across all entities rather than maintaining separate onboarding rules per market.
How it works in practice
- Collection – the applicant submits incorporation documents, an ownership declaration, any sector licences, and identity documents for directors and beneficial owners.
- Verification – submitted data is matched against company registries, beneficial ownership registers, and document-authenticity checks. A declared structure that contradicts the register stops the file until the difference is explained.
- Screening – entity and individuals are run against sanctions, PEP, and adverse-media sources. Screening repeats on a schedule after boarding, since list additions happen between reviews.
- Risk rating – jurisdiction, ownership complexity, industry, and expected volume combine into a score. A rating triggers enhanced due diligence: source-of-funds evidence, additional documentation, or senior sign-off.
- Decision and review – approval, conditional approval, or refusal, followed by periodic re-verification at a frequency set by the risk rating.
Penalties for non-compliance
- Regulatory fines – national supervisors fine firms that board entities without adequate verification. Penalty scales are set in national anti-money laundering law and differ by market.
- Licence conditions – a supervisor can restrict permissions, impose an onboarding freeze, or require an independent review at the firm's expense.
- Criminal exposure – processing for a sanctioned or fraudulent entity exposes the firm and named officers to prosecution, particularly where controls were bypassed.
- Loss of processing – card schemes and sponsor banks terminate portfolios containing entities they consider unverifiable, which removes processing capability regardless of the regulatory outcome.
