No business can survive alone, it must cooperate with other businesses. All the businesses have to communicate with other businesses to sustain. For instance, vendors need suppliers and manufacturers need retailers. But the problem is how will a business ensure that its partner business is legitimate and does not involve in any criminal activity. It is the legal responsibility of all businesses to conduct Know Your Business verification and Ani-Money Laundering screening, said John O. from twiftnews.
Know Your Business
It is the identification and verification of all the business entities that are communicating with an organization. Know your business performs enhanced customer due diligence on all of the stakeholders and key people of the business. All the third parties need to be appropriately defined, identified, and verified because criminals took advantage of these loopholes. It is easy for bad actors to target large businesses that have a complex business structure.
Weak due diligence can result in a business being unintentionally involved in financial crimes. A little involvement in any financial crimes can negatively affect the business reputation in the market. Not only this but a business can face sanctions or fines by law enforcement authorities. Fines’ amount can be in millions or billions, banks paid 6.2 billion US Dollars in 2019.
The requirements for knowing your business are considerably improved. Globalization is most important, now businesses do not want to operate in a single state. The locals want to expand their business on a global level. Criminals invest in foreign firms because generally, that firm does not have any record of criminal history. Another is the continuous demand of financial watchdogs to clean illicit funds from business operations.
Know Your Business Program
Governments and international regulatory authorities require businesses to develop internal business verification programs. An efficient business program has prevention and protection techniques.
A risk-based approach consists of developing rules and practices that block the involvement of any criminal activity. The purpose of business, its investment sources, and the beneficial owners.
Know Your Customer Checklist
All the stakeholders and key people of the business are verified by KYC verification. Their name, dob, and nationality are confirmed through identity documents. The financial information like bank accounts data and tax filings. There may be a case where a customer is legitimate, doing a legal business but involved in tax evasion.
The purpose is to stop the involvement of any frontmen, tax evasion, and criminals in a business deal.
Anti Money Laundering Screening
As the primary objective of business verification is to block financial crimes like money laundering. AML screening is done to check that the business itself or the key people haven’t been involved in any money laundering-related activity. The screening is done against Politically Exposed Persons, blacklists, and sanction lists. Law enforcement agencies and financial regulatory authorities regularly issue lists of individuals and businesses that are involved in financial crimes.
Automated Business Verification Process
In the era of digitization and virtualization, there is no time to go and check every document of the business. The KYB process is completely automated that performs all the verification and screening in real-time. There is no requirement to organize meetings with business’ management. The information is just collected either by hand or digital form, then all of this information is verified by Know Your Business software. KYB solutions provide online software that gives verification results in real-time. The software does all the individual and business verification in minutes.
Before automated KYB, this process was very time and resource taking. Employees have to manually check all the documents and verify them against sanction lists. There may be a case where a business is involved in financial crimes in one state but start its function in another. The other state may be unaware of their objectives and allow them to do business. But now all the financial crime data is centralized and regularly updated. It gives the ease of verifying business from different origins.
All the business should perform Know Your Business verification on all of their partner or associate businesses. It will give their business a better reputation in the market and compliance with KYC and AML directives