Know-Your-Business (KYB)

Know-your-business (KYB) is the process financial institutions and other regulated entities follow to verify the identity and legitimacy of business customers before establishing a business relationship.

KYB involves verifying a company's registration details, ownership structure, directors and beneficial owners. It may also include screening against sanctions lists, politically exposed persons (PEP) databases and other relevant risk indicators. The purpose is to identify potential risks associated with business relationships and help prevent money laundering, terrorist financing and other financial crime.

Moreover, KYB is an integral component of an organisation's anti-money laundering (AML) and counter-terrorist financing (CFT) procedures. While Know Your Customer (KYC) focuses on verifying individuals, KYB focuses on verifying legal entities and understanding who ultimately owns or controls them.

KYB and the Travel Rule

The Travel Rule, set out in FATF Recommendation 16, requires virtual asset service providers (VASPs) to obtain, hold and transmit specified originator and beneficiary information for applicable virtual asset transfers.

KYB can support Travel Rule compliance by helping VASPs establish the identity and legitimacy of business counterparties. For example, when a VASP conducts due diligence on another VASP, verifying the counterparty's legal identity and ownership structure can form part of the wider assessment.

However, KYB and the Travel Rule serve different purposes. KYB verifies a business and assesses its associated risks, whereas the Travel Rule governs the handling and exchange of specified information relating to virtual asset transfers.