The 4 Best KYB Software Providers & How to Choose One

In brief: 

• Our top picks for KYB software vendors include Middesk, Trulioo, Ondato, and iDenfy.
• Deciding which KYB software solution your company needs depends on factors such as how big your company is, what primary risks your customers present, where you operate, which elements of KYB you’re good or bad at handling, and what’s within your budget.
• The best KYB platforms should have functions for retrieving business formation documents, screening financial watchlists for businesses, people, and territories, screening lists of politically exposed persons (PEPs), screening for adverse media coverage of a business or associated person, and automating tedious tasks to speed up your KYB process and free up your employees’ time.

As of 2016, companies that have other businesses as customers need to perform Know Your Business (KYB) identity verification in addition to any other identity verification procedures (such as Know Your Customer, or KYC). This means verifying that a client business is legitimate, unique, and properly licensed to operate. It also means checking that the people who own the business are genuine and not involved in illegal activity.

These new regulations have put increased pressure on financial institutions (and other companies) to ensure they aren’t working with businesses being used for illicit purposes. To ease that burden, many companies have turned to software solutions to organize and automate their compliance efforts.

This article talks about why they have done so (and why you should, too!), what you need to consider when shopping for KYB software, and what some of the top KYB platform vendors currently out there are. To help answer these questions, we cover:

We’ll start with some questions your company should ask in order to narrow down which KYB software platform is right for you.

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Choosing the right KYB software for your needs

The specific software you choose to run your KYB operations will depend on your company’s strengths, weaknesses, and other circumstances. Here are a few points to consider.

• Company size: How big is your company, and how many resources can it afford to commit to learning and operating KYB software of varying complexities?
• Client volume: How many clients does your company currently have, and what is its average onboarding rate for new clients?
• Clientele risk profile: Who are your major customers, and what are the common characteristics that make them potential financial risks (political exposure, frequent high-value transactions, operating in risky business sectors, etc.)?
• Jurisdictional concerns: In what countries/regions do you or your clients operate? What are the local KYB regulations you have to follow as a result?
• KYB strengths & weaknesses: What elements of KYB is your company already efficient at, and which ones need streamlining? Would some kind of internal analysis program help?
• Cost vs. benefits: Is the software’s price within your budget? Will it allow you to remain profitable? Keep in mind that the software will provide gains or savings in other areas that will offset its cost. 
• Company growth prospects: Will your company need a scalable solution as it grows, or is it already about as big as it’s going to get?

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5 important features to look for in a KYB platform

Regardless of your circumstances, there are a handful of functions that you’re going to want in any KYB software solution you end up adopting. Here are 5 of our top must-have features.

Formation document retrieval

Most businesses have to file formation paperwork (such as Articles of Incorporation) to authorities in their jurisdiction. Some also must provide proof of licensing if they’re in a heavily-regulated field.

Having a KYB system that includes a document retrieval service lets you confirm whether these documents exist and are legitimate for any of your (prospective) business clients. This, in turn, tells you if those businesses are legally allowed to operate wherever they are.

Middesk’s Verify Product pulls company formation document data directly from US Secretary of State offices in each state. That way, you get reliable data on whether a company is legally operating – straight from the government agencies responsible for registering US businesses.

Watchlist screening

Some businesses – including sometimes people involved with them or the countries in which they operate – are on national or international watchlists for financial crime or other dangerous behavior. Presence on these watchlists often means these businesses have restrictions or bans on dealing with them; at the very least, they present greater risks to you financially (if not reputationally).

Having KYB software that can screen watchlists for businesses, people, and countries can help you weed out overly-risky client applicants early in onboarding, or re-evaluate your relationship with an existing client.

Politically Exposed Person (PEP) screening

Some people associated with a business may hold other public administration positions that they (and/or others) could exploit for illegal financial gain. This increased opportunity to commit (or at least be accessory to) a crime warrants closer monitoring of these people (and perhaps also their family / friends / business partners) if you are going to onboard their business as a client.

Software that can perform PEP risk assessments for KYB alerts you to businesses you need to take extra precautions with based on who owns or runs them.

Adverse media screening

Negative media coverage – such as from news outlets or on social networks – can be a powerful risk signal. It doesn’t always confirm a business (or associated person) did something wrong, but it can serve as an early warning that they’re being investigated for illegal or unethical activity. It can also warn of reputational risks from associating with a business if its customers (or the general public) are unhappy with it for some reason.

A KYB software solution that’s able to effectively conduct adverse media screening can help spot these signs of trouble before they turn into actual risks for your company.

Automation

One of the major reasons to use software to handle KYB is to automate repetitive tasks. This speeds up the KYB process while also reducing the chance of mistakes. Both of these together free up time (and money) your company would rather be using on growth than spending on meeting compliance obligations.

There are a few different ways you can automate certain KYB verification processes: namely, those related to data gathering, data verification, and risk assessment. Generally, the more your KYB software can automate, the smoother your operations will be.

The benefits of automation also make it easier to balance the tension between serving your customers’ needs and complying with regulatory obligations to avoid undue risk. We discuss how to navigate more of these types of issues in our e-book below on implementing KYB in every stage of your business.

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Top 4 KYB software providers to choose from

Now for the big question: who should you turn to when you need Know Your Business software? Which vendors have the key features we’ve discussed? Here are our top 4 recommendations.

1. Middesk

Best for: Complete US business coverage and thorough risk signaling

Middesk draws business verification information directly from Secretary of State offices and other US government institutions. This provides reliable data for validating details on US businesses and their owners, including several kinds of other potential risk signals. These include presence on financial watchlists, operation in risky industries, ongoing litigations or bankruptcy filings, adverse media coverage, liens filed against them, and more.

Did You Know?

Middesk has an average data refresh rate of 2 hours on over 160 million US business profiles. No need to worry about whether your KYB data is outdated or even exists – Middesk’s KYB software has it covered!

2. Trulioo

‍Best for: Large database of individual profiles and ID document formats

Trulioo specializes in the identity verification side of KYB. Its database contains information about over 5 million notable people worldwide, and is able to process over 12,000 different types of ID documents from around the globe. Its risk assessment capabilities are mainly limited to screening financial watchlists, though.

3. Ondato

‍Best for: Flexible options in terms of how to verify identities

Ondato provides several methods of individual and business identity verification that can be mixed and matched as desired. It offers photo-based biometrics, video-based liveness detection, or a more traditional system of scanning physical documents. Choosing multiple options can make Ondato a more expensive and resource-intensive software to set up, though. Ondato is also a bit lacking in tools for assessing risk. 

4. iDenfy

‍Best for: A customizable worldwide KYB solution

iDenfy offers a flexible KYB software platform that’s easy to tailor to your company’s specific needs. It also has worldwide business coverage, being able to recognize over 2500 types of ID documents from over 190 countries. The base system has somewhat limited risk assessment capabilities, though, and adding extra customizations can put too much friction in your KYB processes for your customers’ liking.

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6 benefits of using KYB software

We’ll take this opportunity to answer a fundamental question: why use KYB software at all? Couldn’t you just do all of this identity verification work yourself and save the money from buying software to do it for you? In some cases you could, but you’d be missing out. Here are 6 ways KYB software can provide value to your company.

1. Faster verification and onboarding: Part of giving good customer service is processing clients promptly through administrative tasks like KYB. However, this can be difficult for large companies that have hundreds or thousands of customers. Computer software can complete many tedious tasks faster than humans can manually, smoothing out your KYB checks and keeping your customers happy.
2. Less human error: Another risk in manually doing repetitive KYB tasks is that a person may eventually make a mistake due to fatigue, subjective judgment, etc. This can cost you time as you fix the mistake, or have more serious consequences if the mistake isn’t fixed. When programmed correctly, KYB platforms will complete compliance tasks strictly according to sets of instructions, making errors far less likely.
3. Broader data collection: KYB requires collecting and verifying numerous different pieces of information to confirm a client is who they claim to be and isn’t a significant risk. Gathering this information manually is time-consuming, especially if it comes from multiple separate sources. KYB software can retrieve more data from more sources in less time, helping you ensure you don’t miss a critical piece of information.
4. More flexible human resources: Automating menial KYB tasks through software means your employees don’t have to spend time doing them manually. This allows you to use their time more efficiently for complex KYB cases that actually require manual review, or for other tasks aimed more at helping your company grow.
5. Custom options: Many pieces of KYB platforms are flexible enough to integrate with different pre-existing tech stacks, and/or let you customize how they are set up. With these features, you can easily make your KYB platform conform to the systems, regulations, and risk profiles common to your industry or specific to your company.
6. Simplified ongoing compliance: One of the major challenges with KYB is keeping up with change, be that to client risk profiles or to overall compliance rules. KYB software can be automated to update information and even its own functionality as required, or at least alert you to important changes so you can take the appropriate manual action.

Practically speaking, the above things are really only feasible to do manually if you’re a very small company with very few business clients. And as you grow (which is what you want to do, right?), finding the time and people to verify your clients by hand is going to get more and more difficult – to the point where it’s one of the only things your company can do. 

Using KYB software to automate business verification allows you to take back your time and your workforce, using them instead for what your business is meant to do.

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4 critical KYB software FAQs answered

Here are a few more bits of information on why your company could use a KYB software solution.

1. What is KYB software primarily used for?

KYB software is mainly used to automate critical but repetitive business verification tasks such as data collection, data validation, and risk analysis. This lets companies fulfill their compliance obligations quickly, yet thoroughly enough to minimize their chance of accidentally aiding criminals. 

2. Who needs to use KYB software?

In the US, FinCEN’s CDD Final Rule requires all businesses classified as financial institutions by the Bank Secrecy Act to administer KYB when onboarding or reviewing relationships with other businesses. “Financial institutions” include banks, fintechs, credit unions, lenders, stockbrokers, investment managers, currency exchanges, payment processors, and commodities traders. They also include several other types of businesses that frequently conduct financial transactions in high volumes and/or values, such as insurance companies, gambling services, and real estate agencies. For a full list, see this appendix from the FFIEC.

Generally, KYB software is most useful to companies that have large corporate customer bases or large groups of high-risk client businesses. The speed advantages of KYB software help deal with large volumes of verification work, while the precision advantages help to ensure thorough checks on sensitive clients. For these same reasons, though, KYB software can also be useful to fintechs and smaller financial institutions that may be struggling to balance meeting compliance requirements with growing rapidly or serving specific customer niches.

3. What are some other things KYB software can tell me about a business or its associated people? 

Information that KYB software can help you automatically retrieve and verify for identification purposes – or analyze for risk assessment – that we haven’t touched on yet include:

• Names: You can find out if a business has any alternative “doing business as” names, or if anyone associated with that business has any aliases.
• Addresses: You can see if the business has a physical presence somewhere in the jurisdiction in which it is registered.
• Tax identifier: You can search for and look up a business’s EIN or other taxpayer identification code to determine if it’s unique and valid, indicating that the business is properly registered to pay taxes in its jurisdiction(s).
• Industry classification: You can match a business to its associated industry (or industries) by looking up its NAICS, SIC, or MCC codes; then investigate if the industry is prohibited or otherwise known for certain types of risk.
• Liens: You can get lien data reports to check the business in danger of losing assets if it doesn’t pay back a loan, or because it hasn’t paid its taxes.
• Litigation: You can discover if the business is involved in a lawsuit (either as the plaintiff or the defendant), or if it has previously been.
• Bankruptcy: You can look up whether the business is currently in bankruptcy proceedings, or has been before.

4. Is KYB software worth the price?

The price of KYB software can depend on several things, such as what services you need, how many people at your company need access to it, how much you use it, and so on. In the end, though, it’s an investment that saves you time, money, and human resources you’d otherwise have to spend doing KYB manually. Not to mention it helps you avoid fines and other costly penalties from not keeping up with KYB requirements.

Consider how much information you have to process to verify a business, and how many different places you need to look to find this information. You’d need to manually conduct searches in places like Secretary of State offices, the IRS, credit bureaus, county recorder’s offices, courthouses, the SEC, and so on. This is virtually impossible to do in a timely manner – even more so considering you’d likely have to repeat it every time overall regulations or a particular company’s status changed.

KYB platforms solve this by automating certain data collection, risk analysis, and regulation/information update tasks. This makes it easy (and faster!) for your risk team to meet your compliance obligations. Without it, your entire company can get bogged down in mandatory business verification work instead of doing things that help it profit and grow. 

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Lighten your company’s compliance load with Middesk’s KYB software

Middesk’s KYB software equips you with reliable information on US businesses and business owners directly from US government and regulatory agencies. That helps you get your company’s compliance work done quickly, and done right the first time. If you’re looking for even more efficiency, Middesk also has a KYB & business verification API that automates and streamlines your data-gathering processes.

See them both in action by booking a demo with our sales team today.