Know Your Business (KYB)

In one sentence: KYB is how a financial company verifies that a business is real, understands who ultimately owns and controls it, and assesses the risk the business presents.

Why it matters

Criminals use shell companies and complex ownership structures to hide money. KYB is the control that makes it hard to open a business account without disclosing who is really behind it. Regulators require it because businesses present higher money-laundering risk than individuals if the ownership is opaque.

How it works in practice

KYB starts with company verification: confirming the business is registered, checking its incorporation documents, and verifying its address and stated purpose. This is usually done against a company registry in the relevant jurisdiction.

The second step is beneficial ownership: identifying every individual who owns 25 per cent or more of the company, or who exercises effective control. These individuals are then subject to the same identity and risk checks as individual customers.

The third step is understanding the business: what does it do, where does the money come from, and does the requested product or service make sense given the business model.

Red flags

• Ownership structure is unclear or changes unexpectedly before account opening
• Owners or directors appear on sanctions lists or PEP databases
• Business is registered in a high-risk jurisdiction with no clear operational reason
• Stated business purpose does not match the transaction behaviour or requested products
• Corporate registry information does not match documents provided

What regulators expect

FATF Recommendation 24 requires countries to ensure that beneficial ownership information for legal persons is adequate, accurate, and timely. Recommendation 25 applies the same standard to legal arrangements such as trusts. These are separate recommendations with separate scope.

In the US, FinCEN's CDD Final Rule (31 CFR 1010.230) requires covered financial institutions to collect the following from each natural person who owns 25 per cent or more of a legal entity customer, and from one individual who exercises control of the entity: name, date of birth, address, and identification number (Social Security Number for US persons; passport number or equivalent government-issued document number for foreign persons).

VERIFY: In February 2026, FinCEN issued exceptive relief (FIN-2026-R001) that reportedly modified the re-verification requirement at every new account opening for existing legal entity customers. Confirm current requirements with your compliance counsel before relying on the pre-relief standard described above.

Common mistakes

Accepting whatever ownership structure is declared without verifying it against corporate registries. Not re-running KYB when a company changes ownership or directors.