Home Business Know Your Business – How Can It Effectively Deter Shell Companies?

Know Your Business – How Can It Effectively Deter Shell Companies?

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Know Your Business

Nowadays, Identity verification procedures are becoming critical to ensure businesses’ sensitive data remains safe. As per the recent statistics, the financial loss due to cybercrimes will elevate by 15 percent per annum for the next 5 years. The statistics show how important the verification procedure is for all businesses especially if they want to establish partnerships with other companies. The KYB checks facilitate organizations in authenticating the credentials of another business. The KYB checks are crucial to highlight the UBO structure of the financial institution. 

Know Your Business Procedure – What is it?

Know Your Business solution is actually a business identification service so that organisations know about the legality status of the other companies. The system helps companies detect suspicious behaviour early on. The information helps businesses to evaluate the legitimacy of another company and distinguishes it from the pool of shell companies. 

How Does the Know Your Business Solution Work?

AML regulatory bodies demand legitimate documents. The developed businesses face strict security measures when they are dealing with external enterprises. For instance, they are subject to e-IDV and 6AMLD which makes KYB procedure compulsory for companies. 

On the other hand, in the USA, the global watchdogs demand CDD procedures in order to clarify the legitimate owner of the company. There are different KYC service providers that also attempt KYB procedures for different organisations. The latest procedures take lesser time for completing the procedure. The KYB procedure authenticates a business entity using different APIs. the system asks for the registration number and special code of the business for carrying out the effective KYB checks for the clients. 

Why Know Your Business System Should Be Added Along with KYC Procedure? 

The BSA (Bank Secrecy Act), issued in 1970 is a critical AML directive for USA watchdogs. The banking sector and other financial institutions should adhere to their compliance obligations regarding it. The application of BSA (Bank Secrecy Act) resulted in KYC and AML compliance procedures so that proper identity verification of customers can happen. From this came the need to certify businesses. The 5AMLD has centralized the data regarding UBOs. It made the application of KYC and KYB easier than before. 

These days, it is important that every business should know about the legitimacy of other businesses that they want to work with. If such security measures do not occur, they can cost millions to the company. The KYB checks also check if the other company has been blacklisted or not. This kind of information can save the original company from huge trouble. Hence, the KYB procedure plays an important role in safeguarding organisations from fraud. 

How does AI-backed Know Your Business facilitate Company Verification?

The interaction of AI with the technology not only helps in quick client identity verification but also evaluates any financial risks associated with the customers’ profile. It is important according to the AML compliance system. The latest AML services make it easier to spot high-profile individuals on the global sanction watchlist. The advanced technology performs CDD procedures on clients quickly and in real-time. 

The main objective behind the use of KYB is to verify the business. It is especially helpful for the banking sector and financial dealers of different investment companies. It can save them a lot of financial trouble. 

Know Your Business – How Efficient is the Service?

The slow business verification services can be problematic during the customer onboarding process, transaction monitoring, and distant online banking services. This is the major reason a number of financial companies who want to use KYB services or figure out the UBOs of an organization. They cannot put their trust in the Know Your Customer service providers. 

Nonetheless, the use of AI and ML algorithms in identity authentication procedures makes it easier for companies to perform business verifications as well. The use of OCR (Optical Character Recognition) technology gives highly accurate results in no time. 

The use of machine learning algorithms can help detect any manipulation of documents/identity during the authentication process. It should be noted that a number of clients use fabricated credentials for creating top management staffs’ profiles. This is a common practice when Shell companies are involved in any way. 

Summing Up

In a nutshell, the ML algorithms easily detect any manipulation and fabrication in the records. The same criteria applies to UBOs. It means that if there is any alteration in the hierarchy structures, the system will detect it quickly. During the Know Your Business process, it is important that the correct country of origin is clear. The nationality authentication and geolocation features help with it as well. Hence, the procedure helps in verifying businesses and gives accurate results.

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