In a world full of scams, money laundering, and a list of other criminal activities, it’s vital to have protective measures in place.
For banking and governmental identities a few major protective measures are, Know Your Business (KYB) and Know Your Customer (KYC). Though mostly used by financial institutions, the measures utilized can also protect the average citizen.
When doing business with a bank, which we all do, it is important to know what’s needed to be in compliance with these and other protective measures that are put in place, and why.
How is this important?
Money laundering is the act of disguising the truth of where or how money was obtained.
If our financial institutions are flooded with money laundering and fake businesses, it threatens their integrity.
It allows criminals to infiltrate and evade the government and financial institutions — which could lead to inflation or instability of the entire economy.
As an average company, it can be helpful to use KYC or KYB procedures since, in most cases, any people doing business with a known scammer or money launderer can face criminal charges or hits to their reputation.
As kids, we were taught that if you were with Jimmy when he stole a candy and didn’t tell anyone, then you were just as bad — it’s the same concept.
What is KYB?
Know Your Business (KYB) is one of the protective measures set in place to determine the risks of money laundering and fraud.
KYB generally requires firms to perform a series of background checks and collect vital information in order to establish beneficial ownership.
The standard regulations typically require collection of several pieces of identifying information, including:
- Company address
- Licensing documents
- Proof of registration for the business
- Perform background checks
- And the identity of the owners and directors of the business — including passports, driving licenses or personal bank statements
What is KYC?
Know Your Customer (KYC), is similar to KYB in the fact that it also makes firms go through a series of procedures to verify any risk of money laundering or financial crimes.
The difference is, KYC focuses on individuals rather than businesses. It is typically used by banks to determine that you are who you say you are.
In most places, a financial institution can, legally, refuse to do business with anyone who does not comply with the KYC procedures.
Typical information collected to verify the identity of a customer include:
- Driving licenses or passports
- Photo of customer
- Proof of address
- And a background check to determine the person is not involved with criminal activity or political crimes
To protect yourself and the bank you go with, stay up-to-date on current Know Your Business and Know Your Customer standards.
These are vital measures to ensure protection from fraud, money laundering, and other things that can kill the economy or damage the health of the bank system.