If you work in compliance, you have almost certainly encountered the terms KYC and KYB. While they are closely related, they serve different purposes and involve different verification processes. Understanding the distinction between the two is essential for building a comprehensive compliance program that meets regulatory requirements.
What Is KYC?
Know Your Customer (KYC) is the process of verifying the identity of individual customers. It involves collecting personal information — such as name, date of birth, and address — and validating it against official documents like passports, driver's licenses, or national ID cards. KYC also includes screening individuals against sanctions lists, PEP databases, and adverse media sources.
The goal of KYC is straightforward: confirm that a person is who they say they are, and assess whether they present any compliance risk. KYC is required by anti-money laundering regulations in virtually every jurisdiction.
What Is KYB?
Know Your Business (KYB) extends the verification process to business entities. When you onboard a corporate customer, you need to verify not just the company itself, but also its ownership structure, directors, and Ultimate Beneficial Owners (UBOs). KYB involves:
- Verifying the company's legal registration and status
- Identifying directors, officers, and authorized signatories
- Determining Ultimate Beneficial Owners — the individuals who ultimately own or control 25% or more of the company
- Screening all identified individuals against compliance databases
- Assessing the company's jurisdiction and industry risk factors
Why the Distinction Matters
Many businesses treat KYC and KYB as the same process, but this is a mistake. Corporate structures can be used to obscure beneficial ownership and facilitate money laundering, tax evasion, or sanctions violations. A company might appear legitimate on the surface while its UBOs are sanctioned individuals or PEPs.
Regulatory bodies around the world have tightened KYB requirements significantly. The EU's Anti-Money Laundering Directives, the US Corporate Transparency Act, and the UK's Economic Crime Act all place increased emphasis on identifying and verifying beneficial ownership. Businesses that fail to perform adequate KYB face the same penalties as those that neglect KYC.
Building a Unified Approach
The most effective compliance programs treat KYC and KYB as complementary processes within a single framework. When onboarding a corporate client, you should verify the entity, identify its UBOs, and then perform individual KYC on each UBO. This layered approach provides a complete view of risk.
Compliyx provides both KYC and KYB verification through a single platform, making it easy to verify individuals and businesses in one seamless workflow. Our KYB solution automatically identifies UBOs and runs KYC checks on each one. Contact us to see how Compliyx simplifies your verification process.