Eldon Broady

Business Verification to Protect Your Business

Financial Crimes Enforcement Network (FinCEN) proposed Know Your Customer (KYC) in 2014 as part of a customer due diligence program to facilitate anti-money laundering compliance. In 2016, Know Your Business (KYB) was introduced, and like KYC, it helps combat money laundering by identifying companies and suppliers. Therefore, the Know Your Business verification is an anti-money laundering compliance strategy that requires establishing that the business you are transacting with is real and identifying directors and other owners. So how does it protect your business?

Preventing Fraud

Business verification documents usually involve shareholder agreement, company agreement, power of attorney, shareholder list, and commercial registry extract. While these may seem all in order when verifying a business, some of these businesses are shell companies meaning they are only a means to an end. Usually, such are involved in money laundering, tax evasion, and tax avoidance; hence barely have active business operations or significant assets.

To facilitate money laundering, the shell company provides a service that requires customers to pay in cash; hence it can explain its source of money. The terrorists and drug traffickers especially take advantage of US states that are havens because they do not have beneficial ownership information. Shell companies facilitate fraud because registering them requires little information that makes catching the culprits a challenge.

With an automated system facilitating business verification, you can easily retrieve data and share it with appropriate parties. This enables your business to avoid participating in fraudulent activities. You risk losing millions when you lend money to a company that only exists on paper. By verifying its authenticity, you can potentially spot a blacklisted company and save yourself the implications of transacting with it.

Avoiding Fines through Business Verification

Ignorance has never been a defense in law, so it is better to be safe than sorry. Since KYB verification is part of the compliance procedures in anti-money laundering, failure to comply with it puts your business at risk of being fined. In March 2020, fines for KYC, AML, and sanctions had gone up by 160% over the past 15 months, with total penalties globally in December 2019 being reported as $36 billion.

Although banks are usually the victims after failing to employ the right procedures, even financial firms are at risk. Therefore, always ensure that your business is complying with KYB verification procedures to avoid such eventualities.

Author Resource:-

Eldon Broady writes about identity verification and business verification service. You can find his thoughts at ID verification service blog. If you are looking for id verification service, visit this website.