Business Verification Guide for 2025: Know Your Company's Fundamentals Inside and Out
In the ever-evolving landscape of financial regulations, Know Your Business (KYB) verification has emerged as a crucial component in the fight against money laundering, tax evasion, and other illicit financial activities.
The U.S. Corporate Transparency Act (CTA), enacted in 2024, mandates that most small and medium-sized companies formed or registered in the U.S. must disclose detailed beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). This information includes the legal name, current business address, and identity details of individuals who ultimately own or control at least 25% of the company or exercise significant control, known as Ultimate Beneficial Owners (UBOs).
The CTA aims to reduce financial crimes by requiring businesses to submit their beneficial ownership information via a secure FinCEN online system. While this data is not publicly available, it is accessible to authorized government agencies and certain financial institutions under strict conditions. Failure to comply can result in fines up to $500 per day and possible criminal penalties, including imprisonment for willful violations.
KYB is not limited to regulated industries. It is also adopted by unregulated entities such as e-commerce platforms and car sharing services to reduce fraud risks, prevent financial crimes, and ensure trustworthy partnerships.
In the UK, KYB compliance is required by multiple regulatory watchdogs, including the Financial Conduct Authority, the European Banking Authority, and the Financial Action Task Force (FATF). Enhanced Due Diligence (EDD) is mandatory for companies operating in or associated with high-risk jurisdictions identified by FATF.
Globally, the need for effective KYB measures is underscored by the rising losses due to imposter scams. In 2024, consumers reported losing more than $12.5 billion to fraud, a 25% increase over the last few years, with losses to government imposter scams rising by $171 million from 2023, totaling $789 million in 2024.
To address these challenges, Sumsub offers a comprehensive KYB solution that verifies businesses in a streamlined, automated process. The solution combines document checks, registry extracts, and sanctions screening to deliver verified business profiles in just a few clicks. It also includes an AI-powered feature, ACDR, that extracts all necessary information from corporate documents in any script using advanced OCR technology that covers 140+ languages.
Furthermore, Sumsub offers six unique modules that can be combined via the Workflow Builder, making Sumsub the only 6-in-1 solution on the market. With Sumsub's KYB solution, businesses can monitor their stakeholders on an ongoing basis.
Recently, the FATF updated its standards to better support financial inclusion, aiming to strike a balance between effective anti-money laundering and combating the financing of terrorism measures and inclusive access to the financial system.
As the world grapples with rising financial crimes, the importance of KYB verification cannot be overstated. It is a key component of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations, helping businesses establish the structure, ownership, economic profile, or group structure of a business to ensure transparency and regulatory compliance.
- In the realm of personal-finance and education-and-self-development, understanding KYB verification and its role in fighting financial crimes becomes critical for individuals seeking to invest wisely and protect their assets.
- The advent of technology in finance has led to the integration of KYB in various sectors, such as lifestyle and general-news, as businesses and services strive to maintain transparency and trust with their customers.
- The crypto and casino-and-gambling industries, governed by stringent financial regulations, are also expected to implement KYB verification to prevent money laundering, tax evasion, and other illicit activities.
- Sports entrepreneurs should pay attention to KYB compliance, considering that sports businesses often engage in international partnerships and sponsorships, making them susceptible to financial crimes and the need for AML and CFT regulations.
- As the world focuses on improving financial inclusion and access to the global economy, KYB remains a crucial tool in ensuring that businesses adhere to Anti-Money Laundering and Combating the Financing of Terrorism regulations, fostering a secure and transparent financial landscape for all.
