How to build a Know Your Business (KYB) process

Recently, we held an online event about how to turn KYB and KYC into your competitive advantage, where two Know Your Business (KYB) specialists discussed what the KYB process looks like today and how companies can build a seamless KYB-KYC experience. It was jam-packed with useful information — so much so that we split the recap into two!

In our first recap, we went over the KYB fundamentals like what it is and why it’s important. 

To conclude this series, we’re covering how to build an efficient KYB process and how Persona can help. Let’s dig in!

What does the KYB process look like?

The KYB process can vary from country to country based on regulatory requirements, but ultimately, there are some commonalities across different jurisdictions. Usually, the process involves three main steps:

1. Verify the business

To do this, you need to collect information about the business — usually its name, address, and registration number at a minimum — and any relevant business registration documents.

Keep in mind that this step might look different depending on the type of business you’re trying to verify. For example, sole props may not show up in authoritative data sources, so you may want to include additional checks in your KYB checklist to verify the legitimacy of that individual and ensure you know who they are.

2. Identify and verify the company’s ultimate beneficial owners (UBOs)

Ultimate beneficial owner (UBO) requirements vary from country to country. In the US, it’s very much self-reported, so it can be hard to be sure who owns what (though there's upcoming regulation that could potentially create a central database for beneficial ownership information like in other countries). In the meantime, the Customer Due Diligence (CDD) Final Rule requires firms to verify beneficial ownership with a “reasonable belief.”

To help identify the company’s UBOs, you may want to require them to submit a document that lists out the beneficial ownership for each person and the amount of equity each individual owns.

After identifying who the beneficial owners are, you can run standard Know Your Customer (KYC) checks on each individual.

3. Maintain updated customer information and monitor risk on an ongoing basis

Once you’ve verified that the company and its main stakeholders are safe to work with, it’s important to conduct ongoing customer due diligence — like KYC, KYB isn’t something you should only perform during onboarding. The CDD Final Rule requires covered institutions to “conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.”

In other words, it’s not enough to check whether a business is on a watchlist at the beginning of your relationship. Situations change, so you’ll also want to continually check throughout their customer lifecycle.

How do businesses usually conduct a Know Your Business process?

While KYC processes have become more streamlined with eKYC, with a variety of automation tools, data aggregators, and all-in-one solutions available, there hasn’t been an equivalent shift for the KYB process. Today, many KYB tools focus on cleaning up and aggregating messy data sources — not necessarily streamlining the process itself.

As a result, the process usually ends up looking something like this:

• The business collects company information, such as the business name, address, and EIN or business registration number, from the individual representing the business. For

  this step, we’ve seen everything from custom-built forms to Google forms or long PDFs that the two parties send back and forth via email.

• The business runs business verifications against the information collected in step one. Today, many use Google or manually input these pieces of information into different platforms.

• After identifying the beneficial owners — either by Googling or asking the company to declare its owners — the business collects information on each of them and runs KYC checks, whether that’s through another vendor or via an in-house process.

• The business cross-references all the information and makes a final decision about whether to work with the other company (and the people behind it).

• The business relays its decision to the company — usually via email or a phone call.

What are some common challenges of the KYB process flow?

Historically, the KYB process flow has been extremely manual, disjointed, and complex. Some common KYB challenges include:

• Having to manually collect information across multiple sources. For example, Googling information about the business, asking company representatives who the beneficial owners are, and more

• Multiple back-and-forths between the customer — partially to collect more information, and partially to keep them updated on where you are in the decision-making process

• Multiple KYB vendors handling different parts of the process (for example, one to collect information, one to verify business information, and one to KYC the beneficial owners) — with no way to connect each system

This results in issues including:

• More work for your team, from having to Google information to sending multiple emails to the business, and making manual decisions

• Potential bias and increased room for error due to manual reviews

• Potential data inconsistencies when using multiple KYB vendors

• An unideal experience for the customer, who may get tired of the long wait time and decide to take their business elsewhere

What should you consider when building a Know Your Business process?

When implementing a Know Your Business process at your company, some key aspects you may want to consider include:

• Conversion: How’s the user experience? You want to make sure the time between the business submitting their information and them being approved is as short as possible. If a user needs to write in multiple times to ask what’s going on, your KYB process may be scaring away users and hurting your conversion rate.

• Catching fraud: Are you able to catch illegitimate businesses, bad individuals associated with the business, and individuals falsely claiming to be part of the business?

• Compliance: Are you meeting the regulatory requirements of the different countries you're operating in? Regulation is constantly evolving, and you need to be able to easily and flexibly adapt your KYB process as the rules change. You'll also want an audit trail of the documents you're receiving and the decisions you're granting.

• Coverage: If you’re using a KYB vendor, do they cover all the different countries you're operating in?

• Consistency: Are your KYB processes orderly and efficient? If your team needs to manually review specific cases, it should be clear what steps they need to take. Otherwise, different folks could come up with different results, which can get convoluted and confusing during an audit.

‍How do you build your ideal Know Your Business process?

Every company’s ideal Know Your Business process may look different, but the steps of figuring out how to get there generally involve:

• Figure out your business goals and priorities. What do you want out of KYB? Is your biggest priority complying with regulations, deterring fraud, or building trust and safety? Do you care more about conversion or risk management?

• Figure out your needs. What are your compliance needs (if any)? What does your banking partner require? What is necessary to comply with the regulations you need to follow?

• Figure out what you already have. What provider(s) are you currently using? How do they work together? How’s your overall system working? If you’ve already been conducting KYC, what does that process look like? Do you want to implement the same standards for UBOs?

• Build your process. Once you know your goals, current state, needs, and wants, you can begin building a solution you feel good about.

• Analyze and adjust as necessary. It’s important to continually track key metrics so you can iterate and improve on what you’ve built.

What Know Your Business metrics should you care about when building your process?

The KYB metrics you should track may vary depending on your needs and what matters to your business. For example, your key metrics may look different if your main priority is deterring fraud instead of converting users. At a high level, you may want to think about:

• User experience, e.g. time to completion for each part of the process

• Automation efficiency, e.g. percentage of verifications you’re able to automatically decide on

• Operational efficiency, e.g. how long it takes analysts to resolve cases that need manual review and how much back and forth there is between internal teams and the business going through the process

• Accuracy, e.g. is your system letting through good users and keeping out fraud? How does the automatic system compare to manual review?

How to document and audit your KYB process flow

Once you’ve established your KYB process, it’s important to document it. This will give you an opportunity to explain the logic you used in designing your program, and also give other members on your team a resource they can turn to if and when they inevitably have questions related to KYB.

Some aspects of your process you should consider documenting include:

• The risks that your KYB process is trying to account for, whether they be related to compliance, fraud, or some other concern

• Which types of accounts or businesses that interact with your organization are (and aren’t) subject to KYB

• The data you must collect in order to evaluate the risks posed by each business and UBO, as well as a detailed outline as to how that data is used

• The data sources you prefer to use to validate information about a business, and the reasons why certain data sources may be preferred over other options

• The evidence (registration numbers, TINs, business documents) to be collected to facilitate these verifications

• The tools, technologies, and verification methods you leverage to perform KYB, including an outline of when each technology or method should be used

• A protocol that should be followed for edge cases or other instances where manual review may be necessary

• A breakdown of who is responsible for each component and step of your KYB process

• The logic that underpins your risk-rating and decision making methods

• Any events that may trigger a reassessment of a business’s risk profile

Likewise, it’s important to periodically audit your KYB processes to ensure that they are still effective and to understand if any adjustments can be made. At least once a year, revisit your processes and critique them through the lens of:

• The types of fraud your organization is encountering

• The volumes you’re seeing

• The fraud rates you are experiencing

• The tools available to both you and fraudsters

Best practices for streamlining your KYB process

While a thorough and comprehensive KYB process can help your organization avoid fraud and achieve compliance goals, it can also introduce friction — for both your customers or users, as well as your own business. With this in mind, the tips below can help you streamline your processes in order to reduce as much of this friction as possible.

1. Pursue a risk-based approach

For your KYB process to be effective, start with evaluating the specific types of risk that your organization is exposed to — as well as the risk factors unique to each of your customers. We call this taking a risk-based approach, a strategy that forms the bedrock of many anti-money laundering (AML) and KYC strategies. 

In the context of KYB, for example, taking a risk-based approach helps you:

• Tailor the specific checks, screenings, and verifications you perform to compliance requirements or fraud types your business is exposed to

• Leverage step-up verifications only for customers you deem high risk, while allowing lower risk customers to complete the process with fewer checks

2. Establish clear policies and processes

To avoid any confusion amongst your team — which could result in slower verifications and approvals for your customers, as well as legitimate customers being turned away without cause — it’s important that you have clear, standardized, and established KYB processes. In addition to outlining your process, you should also:

• Designate individuals who can act as a point person for questions that come up

• Explain if and when exceptions can be made in terms of the information or evidence that must be collected 

• Standardize the process as much as possible so that it is easy to replicate, no matter who is performing KYB or what kind of business is moving through your processes

3. Automate as many tasks as possible

Any time a KYB task needs to be performed manually by a member of your team, it means that your customer is waiting — anywhere from a few minutes to a few hours or even days — to be approved. That can significantly impact the customer experience, potentially harming conversions. It also opens the door to human error which can be quite costly to address after the fact. 

The good news? All or nearly all of the steps involved in the average KYB process can today be automated, reducing time to approval to mere seconds versus manual review. Some components of your KYB process you may consider automating include:

• Initial intake and data collection

• Business document collection and verification

• Database verifications and lookups

• PEP, adverse media, and sanctions or watchlist screenings

• UBO verification 

• Risk analysis and final decisioning

4. Reduce back-and-forth during collection

One of the most time-consuming pieces of the KYB process for many businesses is the business document collection phase. This is when you are collecting the ownership documents, tax documents, and other corporate documentation you need to verify that the business is, in fact, real and legitimate. 

The problem lies in errors made by the user during this phase — for example, when they upload the wrong documents, expired documents, or documents that are illegible. Errors like these necessitate a time-consuming back-and-forth between a member of your team and the customer, which can add days or weeks to the process in a worst-case scenario.

You can reduce errors like this by automatically verifying documents as they are uploaded. This simple step empowers you to immediately understand whether errors have been made, at which point you can prompt the customer to upload a different document or otherwise correct the issue. 

What should you look for in KYB vendors?

There’s no reason KYB shouldn’t be as seamless as Know Your Customer (KYC), which is the process of verifying individuals you’re interested in or currently working with.

Rather than having to stitch together multiple KYB vendors, you should be able to use one system to manage the entire lifecycle — from collecting and verifying business info to KYC checks on the ultimate beneficial owners (UBOs). Or, if you really want to use multiple data sources and/or vendors, it should allow you to easily integrate with all of them.

Your KYB tool should also be flexible in other ways, allowing you to design and implement a custom process based on your goals, priorities, and changing regulatory needs.

What sets Persona KYB apart?

Persona’s KYB solution is the first in the market to automatically orchestrate the entire KYB process from end to end. With Persona, you get:

A fully customizable collection and verification engine

Use Dynamic Flow to collect information about both the business and its UBOs. Everything is fully customizable and configurable — from the look (font, text, logo, color scheme, size of text, placement of buttons, and more) to what information you want to collect, whether that’s the business’s name, address, and EIN or their estimated revenue and headcount. It’s important to build trust with your customer up front, so we give you all the tools to customize the flow to match your brand.

Once you’ve collected the necessary information, choose how you want to verify the business and UBOs. For businesses, this includes (but is not limited to):

• Document verifications: Allow users to either take a photo of or upload business documents, such as their business registration certificate. Once they submit, we’ll run verifications in real time, also checking that the document is actually relevant and hasn’t been tampered with.

• TIN verification: Takes the business name and tax ID number and confirms there’s a valid match against the IRS.

• Business lookup report: Takes the business name and address and verifies the business exists in the US.

• Business watchlist report: Screens the business across 1000+ global sanctions, warning, and fitness & probity lists.

• Business adverse media report: Screens the business to identify any negative or unfavorable information associated with it.

For individual UBOs, this includes:

• Document verifications: Collect any document, such as a government ID or utility bill, and extract the details from the document. We run a number of tampering and fraud checks behind the scenes to make sure it hasn’t been digitally altered.

• Biometric verifications: Ensure an individual’s selfie matches their ID portrait with liveness checks.

• Database verifications: Verify user-submitted information against databases from organizations such as the IRS and DMV to ensure authenticity.

• On-demand reports: Screen the individual against reports such as watchlists and adverse media.

Our automatic risk verification engine also makes it easy to personalize the user experience based on how risky they seem, to mitigate identity verification challenges in the KYB process flow. For example, if businesses with more than one address tend to commit more fraud on your platform, you can automatically send these cases to manual review so your operations and compliance team can take a closer look. On the other hand, you can automatically approve businesses with just one address.

And if a new regulation comes out or you encounter a new type of fraud and need to change your verification flow, no problem — it’s easy to change everything from the type of information you want to collect to the verifications you want to run or how many times the user can attempt verification.

Automation

Rather than someone on your team having to manually collect and verify each UBO’s personally identifiable information (PII) and ID, our system will automatically email each beneficial owner (once they’re identified) to complete the KYC process independently using Persona. This offers a more secure experience and also allows you to conduct KYB and KYC processes simultaneously, improving conversion and saving time.

Automation also helps reduce back-and-forth between you and the business you’re verifying. One of the biggest pain points we hear from customers is how if a user submits the wrong document (e.g. it’s for a different business or is the wrong type of document), they have to reach out to the user — whether via email or another communication platform — to ask them to submit the right document. 

By scanning the document in real time, Persona’s platform can help streamline this process and ask them to submit the correct document while they’re still completing the verification process, so you don’t have to.

All the information you need in one place

Our case management tool centralizes all the information you’ve collected into one single view. This is especially handy if you end up needing to perform one-off manual reviews.

Onboard businesses faster with Persona

With Persona, you get an end-to-end, streamlined solution that allows you to stitch together business verifications and KYC in one place. Tie in with the rest of your business onboarding process, thanks to integrations with vendors like Salesforce and HubSpot.

Optimize for conversion by streamlining the KYB process flow for both the end users and yourself — with Persona KYB, you can view multiple disparate pieces of information in a single view, making it easy to decide on whether to approve or decline the business.

Plus, it’s easy to get started quickly — having one system manage the entire process from end-to-end means fewer vendor evaluations, and we’ve seen customers implement Persona’s KYB solution in as little as a day or two. Choose from integration options that range from adding a link to your platform to embedding the experience into your webpage or mobile app.

Ready to automate your KYB process and onboard more businesses? Reach out to your CSM or contact us for a custom demo today.