WIREDGOV

Why 'Know Your Business' (KYB) is as vital as 'Know Your Citizen' (KYC) to prevent fraud

While it is convenient to have public services online it comes with some risk - fraud which is on the rise.

Numerous public sector organisations are employing know your citizen (KYC) strategies to help prevent fraud. However, it is only part of the solution. Know your business (KYB) checks are equally important and should be performed in tandem with KYC to combat fraudulent activity. Undertaking such checks highlights what sort of company you are dealing with and whether they are, in fact, a legitimate business, sanctioned, or managed by bad actors. It is vital insight that reveals the potential threats of conducting business with an organisation.

The Bounce Back Loan Scheme, which was available to businesses during Covid, is a good example of why KYB is so critical. Of the £47 billion worth of Bounce Back Loans, £17 billion is already expected to be lost with £4.9 billion of that figure attributed to fraud. This massive, costly fraud is due to ‘light touch’ checks by the government for those businesses applying for loans during the pandemic.

Why provide KYB and KYC checks?

Delivering KYB screening enables organisations to fully understand the risks posed by new and existing business users and suppliers. This is very beneficial because fraud is frequently committed by shell companies or organisational structures that just don’t exist in reality, so KYB checks can significantly mitigate that type of fraud from happening. Also, it will help to prevent financial crime, such as money laundering and terror financing, which could cause substantial reputational damage.

It is worth highlighting that undertaking best practice due diligence by delivering KYC and KYB screening not only reduces the opportunity for fraud but has many other benefits. These include the ability to personalise communications, improve the delivery of services and the overall user experience, and provide a competitive advantage. Furthermore, KYC facilitates operational efficiencies. These factors are very important, particularly during a time of high inflation and economic uncertainty.

How to implement effective KYB screening

The main difference between KYC and KYB checks lies in the information required to verify identity. With KYB you don’t verify a name, address, date of birth, for example, as is carried out for an individual, although this data is obviously important for both KYC and KYB checks. For a reliable and cost-effective approach to KYB screening it’s advisable to cross-check a company name, address, business registration number, and operational status. Those who want to go a step further and deliver a more in-depth KYB screening process, which includes identifying any person with significant control – the beneficial owners, the company’s annual returns, or financial statements – must assess the benefits against the often significant cost of doing so.

Source a SaaS eIDV platform with integrated KYB and KYC functionality

To implement effective KYB and KYC checks globally, it’s best to source a comprehensive software-as-a-service (SaaS) electronic ID verification (eIDV) platform that delivers both. With the growth in fraud, these tools are becoming increasingly popular. They are straightforward to deploy, scalable, and support real-time cross-checks against an individual's contact data – all carried out as an online application or sale is completed to ensure the user experience isn’t negatively impacted.

These tools must have access to reputable global data streams, such as government agency, credit agency and utility records, to match the name, address, date of birth, email, or phone number, along with recognised sources of business data, such as from a business registry or regulator, like Companies House. Also, the platform should offer mortality screening checks to effectively confirm the ID of an individual and be able to highlight any errors in the data, such as a typo in the address, which can easily be corrected.

In addition, the service should provide access to worldwide sanctions and politically exposed person (PEP) data, as well as adverse media checks of both individuals and businesses to provide a full ID verification service. This way, tight budgets can be protected against scammers, while also supporting best practice KYB and KYC.

Those in the public sector can no longer ignore KYB and KYC with fraud on the increase. KYB and KYC checks must be implemented in tandem as a matter of course, ideally via a full-service SaaS identity verification platform. 

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