“Know your business” (KYB) is a term used to refer to the process of verifying the identity and legitimacy of a business or individual with whom a financial institution is conducting business. KYB typically involves conducting due diligence on the business or individual, which typically includes verifying their identity, assessing their business activities and operations, and ensuring that they are not involved in any illegal or high-risk activities. This is an important step in mitigating the risk of conducting business with individuals or entities that may be involved in activities such as money laundering or financing of terrorism.
In order to conduct KYB, financial institutions typically require the business or individual to provide certain documents and information. These may include the following:
- A government-issued identification document, such as a passport or driver’s license, to verify the identity of the business owner or individual
- Proof of address, such as a utility bill or bank statement, to verify the business or individual’s place of residence
- Business registration documents, such as articles of incorporation or a business license, to verify the legitimacy of the business
- Financial statements and other documents related to the business’s operations and finances, to assess the business’s activities and potential exposure to risk
- Information about the business’s customers and suppliers, to assess the potential risks associated with the business’s relationships
- Any other relevant information or documents that may be necessary to assess the business’s risk profile.
By reviewing these and other relevant documents and information, financial institutions can conduct KYB and ensure that they are not conducting business with individuals or entities that may pose a risk to the institution.
This page was last updated on January 2, 2023.