Businesses have changed their way of interacting with various companies around the globe. The main triggering force for this transformation was the Covid-19 pandemic. Online transactions to deploy multiple business contracts have started to prevail. Several shell companies have started to upsurge which can easily scam businesses and cause them huge losses financially. From providing assistance to other companies, and formulating relationships with them, it has become mandatory for the businesses to mandate the regulatory compliance for onboarding authentic clients.
The need for verifying companies before forming business-to-business relationships has arisen. It is essential for businesses to verify the corporate information of their customers, examine the personal data of higher management and evaluate the operation of other firms. This can all be carried out by using the process of Know Your Business (KYB), in which the ownership structure of the business is demonstrated and clients are verified before establishing any links with them.
A Basic Guide For KYB Checks – Understanding the Work Mechanism
Know Your Business checks are vital for performing the due diligence process of companies against illicit crimes such as money laundering, terrorist funding, corruption, identity theft, and other risks. As evident from the Shufti Pro News, this can help to get an overview of if some company is legit or is taking advantage by hiding its true identity. Moreover, it helps in providing an understanding that a business is legally authorized to operate its functionings or is just restricted to papers only. Typical business verification services go through the following procedure:
Verification of the Registration Documents
The initial steps for company verification include asking the business to provide its registration documents. Upon acquiring those files, the system can be able to extract important details such as a business’s name, contact, address, incorporation date as well as the certificate of registration. The more information a company is able to provide, the more it will become easier to validate its authenticity of them and ensure that the company is legitimate or not to deal with in the future.
Screening Against Blacklists
It is important to distinguish whether the company or the owner of the company is a high-risk individual or not. Governments and financial institutions have implied sanction lists worldwide to secure their onboarding process by eliminating those clients who are a suspect and have indulgence in any criminal or illegal activities.
Screening the businesses against blacklists requires fetching large volumes of data to extensively evaluate any signs of risks by cross-checking their detail with provided sanction list to ensure that they are authentic companies to establish relationships.
Determining any Adverse Media Coverage
It is necessary to check companies against any adverse media coverage as it would provide a clear indication that there is something wrong with the business. All previous records and reports are scanned from around the world to check that a company is having links with a criminal organization or has been previously involved with them or not in the past. This will certainly make them unsuitable to work with any business.
Checking the UBOs
Anyone who owns 25% or more shares, or has control over the business decisions and strategies is the Ultimate Beneficial Owner of that particular business. Knowing your business meaning requires checking who is the UBO of a firm to protect the company from being involved in any sort of criminal activity. Monitoring what type of influence they are posing on the company is essential to deter fraudulent activities.
Screening Against PEPs
PEPs are politically exposed persons who are categorized as high-risk individuals due to their vulnerability to money laundering, corruption, bribery, and other relevant scams, etc. If anyone significant in the business has any links with a politically exposed person then the risk to do business with that company becomes high. So verifying the PEPs is essential for securing the company from any damage prone to them.
Wrapping it Up
Verifying businesses can help to save them from huge financial losses and can protect their brand image in the global market. Making sure that the KYB checks are in place and updated can be essential for onboarding clients and developing relationships with trustful companies. Checking their background history can help to reduce the number of frauds associated with money laundering, terrorist financing, and much more and can protect a company from hefty penalties.
Therefore, it is mandatory for companies to verify their business according to the guidelines of the process of Know Your Business for keeping fraudster activities at bay. Due to its robustness, multiple companies have started to invest to secure themselves from illicit scams just like Shufti Pro Fundings.
