Glossary Know Your Business (KYB)

Know Your Business (KYB)

Know Your Business (KYB) simply explained

Digital business models require speed and trust - even in B2B. It is no longer enough to simply identify private customers. If you want to acquire companies as customers, you have to check their identity, ownership structure and risk profile. This is precisely where KYB comes in - short for Know Your Business.

The Business KYC (BKYC) process protects against money laundering, fraud and reputational damage, and it is legally required in many countries. However, traditional Know Your Business (KYB) processes are often manual, time-consuming and prone to error. Media disruptions and a lack of system integration further complicate efficient implementation. This article demonstrates how digital identity solutions can secure, speed up and scale up the KYB process.

What does Know Your Business (KYB) mean?

Know Your Business (KYB) is a digital verification process for companies. Its aim is to verify business partners in a legally compliant manner, providing insight into ownership structures, beneficial owners (UBOs) and potential risks. KYB is an integral part of legal requirements such as the EU Anti-Money Laundering Directive (AMLD), Germany's Money Laundering Act (GwG), Austria's FM-GwG and Switzerland's GwG.

Unlike KYC (Know Your Customer), which relates directly to identifying end customers, KYB primarily focuses on legal entities, such as companies, organisations and corporations, both nationally and internationally. An essential part of the KYB process is identifying the underlying beneficial owners (UBOs), i.e. the natural persons who exercise control or influence.

Who is obliged to take the Know Your Business (KYB) test?

Business KYC (BKYC) is relevant for all companies that enter into relationships with other companies as part of their business activities, especially when it comes to regulated industries. These include, but are not limited to:

• FinTechs and neobanks that provide corporate accounts
• Payment service providers that onboard business customers
• Insurers and underwriters that underwrite commercial policies
• Crypto platforms that are AMLD or MiCA regulated
• Leasing and factoring providers that cater to B2B customers
• B2B platforms that facilitate registrations or transactions between companies

In practice, KYB also affects anyone who enters into a business relationship with potentially risky companies - for example from high-risk countries (e.g. Iran, Russia, North Korea) or with a complex ownership structure.

This is how a Know Your Business (KYB) process works

A complete KYB process comprises several stages, which together form a risk profile of the company:

1. Identification of the company: comparison with official registers, verification of name, registered office, legal form, status
2. Identification of beneficial owners (UBOs): Who holds shares or controls the company directly/indirectly?
3. Risk assessment & check against sanctions lists: comparison with PEP and AML lists, political or geographical risks
4. Documentation and traceability: audit-proof filing of all check steps
5. Regular monitoring: updating in the event of changes, e.g. change of UBO or change of name

Depending on the company structure, this process can be simple or very complex - especially in the case of complex shareholdings or international companies.

Challenges in practice

In practice, implementing KYB audits can present companies with organisational, technical and legal challenges. The following issues are particularly prevalent in international contexts and among businesses with high-growth models:

1. Complex ownership structures and international shareholdings

Identifying beneficial owners (UBOs) can be difficult, particularly in the case of holding companies, investment companies or foreign company headquarters. Transparent clarification is difficult in cases involving chain shareholdings, trusts or letterbox companies. Manual research into UBOs is time-consuming and carries a high risk of error.

2. Media disruptions and lack of system integration

Many companies still rely on paper-based or hybrid processes. This includes Know Your Business (KYB) applications by email, manual list maintenance and a lack of centralised documentation. The lack of interfaces to commercial registers, CRM systems and sanctions databases leads to delays, redundancies and frictional losses.

3. Legal requirements in different countries

The regulatory framework conditions differ not only between EU member states, but also compared to non-EU countries such as Switzerland:

• In Germany, the Money Laundering Act (GwG) applies with specific obligations for UBO identification, documentation and ongoing monitoring. An efficient AMLA audit ensures that companies can organise their processes in a legally compliant and customer-friendly manner.
• In Austria, the Financial Market Anti-Money Laundering Act (FM-GwG) regulates the KYB requirements for credit and financial institutions.
• In Switzerland, the Anti-Money Laundering Act applies. It obliges financial intermediaries to clarify the contractual partner and the controlling persons - although in some cases with different thresholds and definitions than in the EU.

International companies with subsidiaries or a cross-border customer base in particular must therefore take country-specific differences into account in the Business KYC (BKYC) process - which creates additional complexity.

4. Time expenditure and resource commitment

Manual KYB checks can take several days or even weeks, particularly if data is missing or customers need to be queried. For compliance teams, this results in high research costs, unproductive consultations and cumbersome verification documentation. At the same time, the customer experience suffers, as does the conversion rate during the onboarding process.

5. Data protection, transparency and traceability

Data protection regulations such as the GDPR (EU) and the DPA (CH) must be complied with, particularly with regard to the personal data of beneficial owners. At the same time, supervisory authorities require transparent documentation and traceability of all audit steps at all times. Without automated, audit-proof systems, achieving this balance is almost impossible.

Benefits of automated Know Your Business (KYB) solutions

Modern identification solutions such as PXL Ident can automate the first important part of the KYB process: identity verification. Integration with CRM systems (e.g. Salesforce), connection of relevant interfaces, and further detailed checks can be combined to create a fully digital, automated KYB process that is legally compliant, fast, and scalable.

The advantages of an automated KYB process:

• Automatic data retrieval from commercial registers
• Digital determination of UBOs, even with complex ownership structures
• Accelerated onboarding processes, ideal for FinTechs and B2B platforms
• Audit-proof documentation for internal and external audits
• Seamless data integration into the CRM system
  

The case study of SwiPay, a FinTech company that implemented KYB and digital signatures in under 48 hours, serves as a prime example of successful implementation.

Corporate audit as a competitive advantage

Know Your Business (KYB) is much more than just a compliance requirement. It is a decisive factor in building trust, improving efficiency and promoting growth in the digital B2B sector. Strategic thinking and automated implementation of Business KYC (BKYC) not only reduces risks, but also creates the basis for smooth business relationships.

Scalable KYB processes allow new customer segments to be developed more quickly, whether in FinTech, e-commerce or the platform economy.