Businesses opting for outsourcing and partnerships with global firms may obtain information by simply googling the company’s name. Also, they can ask manual verifiers to assist in carrying out know your business checks. In both cases, businesses are unaware of with whom they are signing a contract. Furthermore, who runs the company and is profiting from the revenue generation.
Criminals use shell companies to reap illegitimate financial benefits from corporate firms. This helps them launder money as well because businesses lack effective know your business checks. Therefore, industries require robust business verification services that help companies identify Ultimate Beneficial Owners (UBOs), conduct background checks, and keep tabs on their affiliates. The blog provides an overview of regulations while highlighting the problems businesses face in complying with them.
Know Your Business (KYB) Legal Requirements to Combat Fraudulent Partnerships
Know Your Business (KYB) considerations mandate businesses to identify the UBOs prior to partnerships. This is because the company might be holding a verified status but the persons it is benefiting, may be risk-possessed entities. They will use the parent businesses’ operations to launder money and escape the regulatory screening. The FinCEN files uncovered over $2 trillion in suspicious global transactions. These funds belong to the company owners or individual customers who fall on the watchlists.
While the whole world is undergoing a technological revolution, businesses are also expanding their services to global companies. However, if they lack business verification services, they might face financial loss and hefty fines to name a few. This is because digitization is providing criminals with sophisticated methods to hide their identities and bypass know your business process. They partner with legit businesses by using their shell companies that exist on paper only.
As per Shufti Pro news, regulatory authorities are revamping strict regulations to counter money laundering and other threats. Some of them are briefed next:
Know Your Business (KYB) Regulations in the US
The criminals take hold of legit businesses to affiliate their shell companies and carry out illicit activities. The prime reason behind this fraudulent partnership is money laundering. Businesses lacking authentic know your business checks leave room for criminals to reap financial benefits mainly. Therefore, global jurisdictions are enforcing know your business regulations for businesses to perform accurate and effective verification alongside due diligence on partnering firms. For this, the US put forth the Customer Due Diligence (CDD) Final Rule. The guidelines state:
“Businesses must identify as well as verify the identity of the UBOs of all legal entities.”
Similarly, the US Corporate Transparency Act came into effect in 2022 that mandates businesses to report their UBOs as well as their affiliates. Furthermore, they should also communicate changes in either of them. Furthermore, the businesses should perform effective due diligence to ensure the partnering company does not hold a rank in the sanction lists. Shufti Pro solutions help businesses better perform these checks by accessing global watchlists and registers.
Therefore, businesses need to tick out manual verification of the company’s documents and incorporate Shufti Pro services instead. With its AI-powered know your business solutions, firms can cross-verify firms against global registers and databases.
Know Your Business (KYB) Regulations in Europe
To address risks faced during and after the B2B partnership, the European Union put forth several know your business regulations. For instance, 4AMLD and 6 AMLD. The requirements to be followed in Europe include the identification of companies and their UBOs. The businesses should perform accurate verification of management while cross-verifying the companies’ authenticity. Furthermore, businesses should also ensure that the company does not possess any risks such as money laundering. For this, business requires effective mechanisms like the ones Shufti Pro provides to eliminate the risk of fraudulent partnerships.
Moving on, as per the requirements under 6AMLD, businesses should verify employees representing or working on behalf of the UBOs. This is because they shield the risk-possessed entities to reap illegitimate financial benefits. However, with robust know your business services in place, companies can mitigate this risk. The Shufti Pro’s solutions provide accuracy while consuming less operational costs. Regulatory authorities also mandate businesses to keep keen checks on their affiliates and report suspiciousness in time.
Know Your Business Solutions Better Addresses Companies’ Problems
Companies have been using manual business verification services that are prone to human errors, have slow processing, and involve hefty costs. This increases the chances of partnerships with shell companies. Criminals hide their identities and UBOs to bypass the know your business verification process. Manual methods are not capable of identifying these in time. Furthermore, shell companies mostly jump from one jurisdiction to another so that they can keep their identity hidden. This way their information is confined to the register of some other jurisdiction. Therefore, businesses require authentic Shufti Pro solutions. It allows businesses to access global registers which mitigate the chances of fraudulent partnerships. To better assist businesses in a better way these digital solutions offer their utmost services. Victor Fredung, CEO of Shufti Pro, stated:
“Shufti Pro is best known for its market-competitive IDV solutions.”
Shahid Hanif, CEO of Shufti Pro, put forth this initiative to assist businesses in performing authentic verification of both customers and partnering firms. The digital know your business services use ML and AI that are not prone to errors and provide opportunities for long-term B2B partnerships.
In the End
Businesses tend to grow by establishing B2B relations and partnering with corporate firms. As per know your business requirements, they should verify companies, management, and especially their UBOs. Shufti Pro’s kyb checks allow businesses to authenticate information while securing their integrity.