The Rise of KYB: Understanding the Latest Trends

Traditionally overshadowed by its counterpart, Know Your Customer (KYC), KYB is now stepping into the limelight as a crucial tool for due diligence and risk assessment in business-to-business relationships.

KYB: navigating local and global regulatory shifts

As business-to-business relationships become more intricate, Know Your Business (KYB) has become essential for compliance and due diligence. Regulatory authorities, including the UK's Financial Conduct Authority and the European Banking Authority, now require detailed due diligence on these interactions. This shift prompts questions about the real controllers of companies, revealing complexities beyond initial appearances.

Corporate structures often mask the true beneficial owners, complicating the onboarding process for fintech firms under anti-money laundering and counter-terrorism laws. Identifying Ultimate Beneficial Owners (UBOs) is a key yet challenging task due to varying definitions and fragmented access to UBO registries. This article highlights recent developments in beneficial ownership critical for organizations to understand.

Global UBOs regulations

In March 2023, the Financial Action Task Force (FATF) revised its guidelines regarding beneficial ownership. This update accentuates the importance for nations to adopt a "multi-faceted strategy" in this area. It is imperative for relevant authorities to have access to precise, up-to-date, and sufficient data about the beneficial ownership of legal entities. Additionally, these bodies must guarantee that both primary and beneficial ownership details are refreshed promptly.

European UBOs ownership threshold

On April 24th, the European Parliament announced plans to finalize new legislation with the commission aimed at curbing the use of the financial system for money laundering or terrorist financing. Key amendments include revising the definition of beneficial owners, lowering the ownership threshold from 25% to 15% for most companies, and further reducing it to 5% for firms in the extractive industry or those at greater risk of money laundering or terrorist financing.

USA Ultimate Beneficial Owner (UBO) register

Beginning January 2024, the USA plans to introduce its inaugural Ultimate Beneficial Owner (UBO) register. Following the enactment of the Corporate Transparency Act in 2021, extensive efforts have been dedicated to establishing the implementation framework. Fincen released its Reporting Rule criteria in September 2022. Nonetheless, efforts continue to refine the accessibility of the register.

The implementation of beneficial owner registers is also expected in Australia and Canada.

KYB: the new standard for fraud detection and risk management

The integration of Know Your Business (KYB) into risk management strategies has become crucial. A 2022 PYMNTS study revealed significant fraud-related losses due to inadequate KYB practices and over-reliance on outdated systems. Firms using advanced, automated KYB solutions, however, saw about 34% lower fraud losses.

This trend is mirrored in the KYB market growth, from $150 million in 2020 to a projected $533 million by 2030, driven by advancements in technology and specialized vendor offerings utilizing AI and biometrics.

Integrating KYB into Broader Risk Management

KYB is increasingly viewed as an essential part of comprehensive compliance strategies, combining corporate and risk screening for a more thorough understanding of financial challenges. This approach moves away from isolated processes, aiming for a more integrated risk management system.

Orchestration in KYB, involving techniques like ID verification, digital forensics, and behavioral analytics, marks a significant shift. This approach not only targets bad actors effectively but also streamlines processes for legitimate customers, representing a move towards a more cohesive risk management strategy.

Synaps KYB solution

Synaps is reshaping the landscape of business onboarding and compliance with its state-of-the-art KYB solutions. We combine user-friendly onboarding with a powerful, all-in-one system, enabling compliance officers to manage alerts and prevent fraud more effectively than ever before.

Enhanced compliance

Synaps solution conducts thorough screenings against comprehensive AML, sanction, PEP, and adverse media lists, ensuring regulatory compliance and reducing the risk of non-compliance. This automated process is combined with the expertise of Money Laundering Reporting Officers (MLROs), ensuring meticulous verification and data integrity.

Reusable and Perpetual KYB by Synaps

Reusable and Perpetual KYB by Synaps represent a significant leap forward in making the KYB process more efficient, secure, and compliant for businesses and their partners.

• Reusable KYB: This groundbreaking feature ensures that once a business is verified by Synaps, its data are securely stored and readily accessible. This eliminates the need for businesses to repeatedly upload their information for each new partnership or transaction. As a result, business partners enjoy faster onboarding processes. Importantly, Synaps maintains the highest level of compliance by re-verifying the stored data for new onboardings without requiring any additional action from businesses.

• Perpetual KYB: Synaps’ Perpetual KYB offers continuous vigilance. Once a business is onboarded, Synaps enables automatic and periodic checks against sanction lists, PEPs, and Adverse Media. This ongoing monitoring ensures that businesses remain compliant over time, proactively identifying and addressing any potential risks or changes in status.