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KYB — Know Your Business

Definition

KYB (Know Your Business) is the process of verifying the identity and legitimacy of a business entity before establishing a financial relationship. While KYC focuses on individuals, KYB addresses the more complex task of verifying companies, their ownership structures, directors, and beneficial owners.

Why KYB is More Complex Than KYC

graph TD
    A[Individual KYC] --> B[Verify 1 person<br/>1 ID document + 1 selfie]

    C[Business KYB] --> D[Verify the entity<br/>Registration, licenses]
    C --> E[Verify directors<br/>Individual KYC on each]
    C --> F[Identify UBOs<br/>Ownership chain investigation]
    C --> G[Verify authorized signatories]
    C --> H[Understand business activity]
    C --> I[Assess source of funds]

    style A fill:#2E7D32,color:#fff
    style C fill:#e53935,color:#fff

KYB Verification Process

graph TD
    A[Business Account Application] --> B[Entity Verification]
    B --> B1[Company registration check<br/>MCA, Companies House, SEC]
    B --> B2[Legal status verification<br/>Active, dormant, struck off]
    B --> B3[License verification<br/>Industry-specific permits]

    B1 & B2 & B3 --> C[Ownership Structure]
    C --> C1[Identify all shareholders]
    C --> C2[Trace to UBOs - 25%+ ownership]
    C --> C3[Identify controlling persons]

    C1 & C2 & C3 --> D[Individual KYC on Key Persons]
    D --> D1[KYC on all directors]
    D --> D2[KYC on all UBOs]
    D --> D3[KYC on authorized signatories]

    D1 & D2 & D3 --> E[Screening]
    E --> E1[Sanctions check - entity + individuals]
    E --> E2[PEP check on all individuals]
    E --> E3[Adverse media on entity + individuals]

    E1 & E2 & E3 --> F[Risk Assessment]
    F --> G{Decision}

    style A fill:#4051B5,color:#fff

Documents Required

Document Purpose
Certificate of Incorporation Proves entity legally exists
Memorandum & Articles of Association Business purpose, shareholder rights
Board resolution Authorization to open account
Shareholder register Identify all owners
UBO declaration Declare beneficial owners (25%+ threshold)
Financial statements Assess business activity and SOF
Trade licenses Industry-specific authorization
GST/VAT certificate Tax registration proof
Directors' KYC Individual identity verification for each director

Complex Ownership Structures

The main challenge of KYB — tracing who really owns and controls the entity:

graph TD
    A[Target Company] --> B[Shareholder: Company B - 60%]
    A --> C[Shareholder: Individual X - 25%]
    A --> D[Shareholder: Trust T - 15%]

    B --> E[Shareholder: Company C - 80%]
    B --> F[Shareholder: Individual Y - 20%]

    E --> G["UBO: Individual Z - 80% of C<br/>= 80% × 60% = 48% of Target<br/>✅ UBO (> 25%)"]

    C --> H["UBO: Individual X - 25%<br/>✅ UBO (= 25%)"]

    D --> I[Trustee: Individual W]
    I --> J["Controlling Person<br/>⚠️ May be UBO depending on trust terms"]

    style G fill:#e53935,color:#fff
    style H fill:#e53935,color:#fff

KYB by Jurisdiction

Jurisdiction UBO Threshold Key Registry Special Requirements
India (RBI) 25% or controlling interest MCA (Ministry of Corporate Affairs) UBO declaration mandatory
EU (AMLD) 25% + 1 share National UBO registers (public) Public UBO register access
USA 25% equity + 1 control person FinCEN BOI (from 2024) Corporate Transparency Act
UK 25% + significant control Companies House PSC Register Public PSC register
Singapore 25% or significant interest ACRA Registrable Controllers register

Key Takeaways

Summary

  • KYB is significantly more complex than individual KYC — entities, ownership chains, multiple individuals
  • UBO identification (tracing to 25%+ natural person owners) is the hardest and most important part
  • Individual KYC must be performed on all directors, UBOs, and authorized signatories
  • Complex structures (holding companies, trusts, nominees) are used to obscure ownership — KYB must penetrate these
  • Corporate Transparency Act (US) and public UBO registers (EU) are making ownership data more accessible