How to Choose a KYB Solution for Business Verification

In brief: 

• KYB solutions are tools that assist with automating the verification of identities of and assessing the risks of a business and its owner(s) in B2B relationships.
• In addition to offering increased speed (and, in some cases, automation), KYB solutions can aggregate data from disparate sources, reduce human error, and be customized to fit a company’s specific needs. All of this makes the KYB process more efficient and frees up resources to use on other work.
• Some important factors to consider when choosing a KYB solution include its adherence to relevant regulations, data security, ease of use and integration, speed and degree of automation, flexibility, and cost effectiveness.

The Panama Papers scandal of 2016 highlighted the need for companies to verify the identities of business and their owners as clients or partners, as well as the identities of individual people as customers. This addition to their regulatory workload has caused many companies to search for ways to streamline – or even automate – Know Your Business (KYB) in order to conserve resources for other operations.

Many KYB software providers and solutions, catering towards this purpose, have popped up since then. But with all the choices available, how does a company choose which solution is the best fit for them? And why is a KYB solution necessary in the first place? This article discusses the options and reasons.

First, let’s talk a bit more about what a KYB solution is, as well as why it’s now virtually necessary for a company to have one when engaging in B2B relationships.

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A KYB solution helps a company onboard or manage another business as a client or partner. It works to verify the authenticity of a business and the identities of its owners, as well as evaluate the risks they may present to the company.

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Know Your Business, or KYB, is a twofold process. One part of it is determining whether a business and its owner(s) actually exist and are representing themselves truthfully. The other part is assessing the potential risks the business’s (and its owners’) statuses and actions present to a particular company.

Proper business verification is now mandatory in many places in order to comply with laws on preventing money laundering, terrorism financing, financing the proliferation of weapons of mass destruction, and other forms of financial crime. But it’s also a lot of extra work companies have to do to ensure they’re operating legally.

As a result, many companies look for ways to streamline and even automate KYB (or at least parts of it). Their goal is to maintain compliance with regulations while freeing up resources – mainly time, money, and personnel – to work on high-priority risk investigations or other projects more in line with their main objectives.

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We’ve already touched on a few reasons to utilize KYB solutions for compliance purposes. Now, let’s do a deeper dive into five specific benefits of using one.

• All data in one place: Data needed for KYB tends to be spread out across several places, like different levels of government, private corporations (e.g. credit bureaus), and even different departments within the same company. A KYB solution allows for searching and aggregating information from all relevant places at once so compliance analysts don’t need to check each one individually.
• Faster data processing: Doing KYB manually is tedious work that slows down the rate at which businesses are checked and/or onboarded. A computer-powered KYB solution can significantly speed up the process, allowing for more businesses to be cleared or rejected in less time.
• Task automation: Know Your Business solutions can do more than just speed up parts of the KYB process; they can even complete some tasks without needing manual intervention. This allows compliance team members to instead focus on high-priority investigations that require manual oversight, or other projects that more directly advance the company’s goals. 
• Avoiding human error: Another danger of having the KYB process be too manual is that it increases the risk of human error. A mistake or omission in data entry can lead to misinformed decisions based on incorrect information. Automated Know Your Business software minimizes this risk by completing tasks in virtually the same way every time.
• Customizing to fit a company’s needs: Companies may have to abide by slightly different KYB regulations depending on what industry they operate in. And depending on a company’s unique circumstances, it may be more vulnerable to certain risks – or at least encounter them more frequently. Many software-based KYB programs can be customized to comply with specific rules and be tweaked to be more sensitive to particular threats.

To fully assess your potential KYB solutions, review our breakdown of how to run a KYB vendor test to determine which option is the best fit for you.

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So how does a company choose the software-based KYB solution that’s the right fit? Here are some of the key considerations.

Ability to comply with regulations

This is a somewhat obvious thing to look for when choosing a KYB system provider, but it’s important nonetheless. The solution should be configured (or at least configurable) to function in accordance with the KYB regulations of the industry and jurisdiction in which it’s to be used. Ideally, it should also be able to automatically update to account for any additions or changes to these regulations (which can happen frequently and without warning).

Data security and privacy

This is another big one. KYB inherently involves handling sensitive information, such as identity data and financial records. Therefore, it’s crucial to be able to protect this information from unauthorized use in order to maintain the trust of (potential) clients and partners.

Ease of integration and use

To maximize efficiency, a KYB software solution should be able to integrate seamlessly with a company’s vendor stack. It should also offer a user-friendly interface so compliance team members can set up and execute KYB-related tasks faster. The provider should also have effective customer support channels to promptly address any questions or problems.

Level of automation

Of course, another very desirable feature of a software-based KYB system is its ability to automate repetitive tasks. This not only helps to avoid inevitable human errors from performing these tasks manually, but it also lightens the workload of compliance team members so they can devote more time to higher-priority work.

Customization and scalability

A company should be able to customize the solution not only to adhere to relevant regulations, but also to hone in on risks that the company encounters frequently and/or considers most dangerous. The company should also be able to scale the system to handle the volume of businesses it takes on as clients or partners.

Value for money

When choosing the right software-based KYB system, affordability is always a concern. Often, pricing will vary depending on how many people will have access to the system, how much business data it will be processing, and how much customization is needed for it. But also take into account how well it does the other features listed above. A more expensive system may be the best choice if its functionality is a better fit for the company’s needs.

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Now that we’ve identified some of the essential includes in a KYB solution, which vendors deliver on them? Here are five popular options.

1. Middesk

Best for: Wide-angle view of business and owner identities and risk factors

Middesk provides business verification and underwriting solutions that draw data directly from official U.S. government sources, including state Secretary of State offices. Beyond basic information, it also provides tax identifiers, international watchlist screening, industry categorization, registration document copies, web presence samples, litigation information, and more.

Middesk’s TIN/EIN search tool can cover business tax IDs, while its OFAC list search tool and PEP and sanctions list screening have you covered to ensure you don’t work with prohibited businesses. And through its integration with Socure, Middesk can draw identity and risk information about businesses’ ultimate beneficial owners (UBOs).

Set up a demo today to learn more about how Middesk is an essential part of a successful KYB tech stack.

2. Ondato

Best for: Flexible KYB options for conforming to risk appetites and client preferences

Ondato’s KYB solution takes a “build your own process” approach to assisting with business verification. Companies can choose from a fully-automated photo-based version, an  agent-assisted video-based version, or a version that relies on manual ID document uploads. Ondato’s system can pull identity and risk-related business information from nearly 200 different countries, and can identify the ultimate beneficial owners of businesses in 50 countries.

Ondato’s main downsides are that it’s somewhat expensive, and integrating it with a company’s existing systems can be tricky and take some time.

3. Trulioo

Best for: All-around business and individual ID verification

Canada-based Trulioo features identity verification functions such as ID document validation, business detail checks, and financial crime watchlist screenings. It has a global ID database that can recognize nearly 12,000 different types of ID documents, as well as over 5 billion individuals.

Where Trulioo falls short is in the risk assessment aspect of KYB. It doesn’t feature much in the way of behavioral or other contextual information that would help with assessing risk. It also doesn’t have risk scoring capabilities.

4. iDenfy

Best for: End-to-end identity verification and risk assessment for people and businesses

An up-and-coming KYB solution provider from Lithuania, iDenfy provides a comprehensive approach to identity verification and risk assessment. It offers a customizable platform that is able to verify over 2,500 types of ID documents from over 190 countries, screen AML watchlists and sanctions lists, and verify addresses and telephone numbers. It also has good customer service that even helps out with manual case reviews.

Although iDenfy has risk scoring capabilities, they aren’t as advanced as those of other KYB vendors; namely, they don’t query hardware or software details (i.e. device fingerprinting). And while iDenfy’s KYB approach is thorough, it also causes increased process friction. This can slow down the onboarding process and frustrate customers.

Cover your KYB obligations with Middesk

In the world of business regulation, knowing who individual clients are isn’t good enough anymore. Companies that want to work with other businesses as customers or partners need to know that those businesses actually exist, are honest regarding what they are, and are operating within the law. Not only that, companies need to know the owners of those businesses are real people who are representing themselves truthfully and not involved in illegal dealings.

All of this work takes time and money that few companies can afford to spend. That’s why they need a solution like Middesk. Our platform draws data from US state Secretary of State offices and other official sources to provide information about a business’s identity, registration, taxes, watchlist status, industry category, web presence, litigations, and more.

Set up a demo to see our full KYB capabilities and how we can enable your business verification process, and set up a hands-on demo.