When you open a new account with a bank or payment institution, you will probably hear the acronym KYB.
KYB stands for Know Your Business. It is a regulatory and legal requirement for banks and other related institutions to identify and verify the identity of their business customers.
The term can also be used for the process of identifying end customers via a KYC (Know Your Customer).
Banks undertake such processes to comply with various regulations, such as the Anti-Money Laundering and Anti-Terrorist Financing (AML/CFT) regulations.
Why is this necessary?
KYB helps prevent banks from being involved in criminal or terrorist activities and thus helps them to remain compliant with mandatory international rules.
In Europe, KYC is a regulatory requirement for payment institutions, as set out in the EU Directive 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing.
How does it work?
Banks fulfill their KYB requirements by verifying various information and obtaining certain documents from reliable sources. These documents include, but are not limited to, the following:
- the company's business registration,
- an extract from the commercial register of the company's country,
- a valid ID of the legal representative.
💡 More information about Documents to create a company account and What is a legal representative.
How does this help businesses?
👉🏻 The ultimate goal is to identify and investigate any suspicious activity.
In addition to protecting banks and financial institutions from being inadvertently exploited or used for criminal or terrorist activities, the KYB process also protects customers as it prevents unwanted incidents such as identity theft and fraud on their accounts.
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