KYB (Know Your Business)

Key points

• KYB, short for know your business, is the process of verifying the identity and legitimacy of a legal entity.
• It is the equivalent of KYC for companies, but more complex, since it also involves understanding who controls the business.
• It is required of financial service providers when establishing relationships with clients that are companies.

What is KYB?

KYB is the acronym for know your business. It refers to the procedure by which an institution verifies the identity and legitimacy of a client that is a legal entity, rather than an individual. Just as KYC seeks to know the individual client, KYB seeks to know the company: its legal existence, its activity and, crucially, who is behind it. It is part of the compliance obligations in the financial sector.

How it works

Verifying a company is more complex than verifying an individual. Besides confirming the existence and regularity of the legal entity, KYB typically requires understanding its structure: who the partners and representatives are and, above all, the ultimate beneficial owners, that is, the individuals who actually control or benefit from the company. This involves analyzing corporate documents and, often, applying identity verifications to the relevant individuals behind the business as well.

The goal is to prevent corporate structures from being used to hide identities or illicit purposes. Shell companies and complex ownership chains can serve to mask who is really behind operations, and KYB seeks precisely to pierce this opacity by identifying the real controllers. For this reason, it connects directly to anti-money laundering rules and the fight against the financing of illicit activities.

In the context of virtual assets, KYB is relevant for providers that serve companies, such as platforms that offer payment or custody services to corporate clients. Before establishing the relationship, these providers need to know the client company and its controllers, apply verifications, and monitor the relationship according to applicable rules. As with KYC, the specific requirements vary by jurisdiction and evolve over time, and it is up to each institution to comply with them according to the rules in force.

Understanding KYB helps to grasp how companies are verified in financial services and why this is more complex than verifying an individual.

Why it matters

Understanding KYB helps to grasp how financial providers verify clients that are companies and why identifying the real controllers is essential against the misuse of corporate structures. For a company, it is part of its compliance. This is an educational explanation, and it does not represent any legal or compliance guidance.

Risks and limitations

KYB involves analyzing corporate structures that can be complex or deliberately opaque, which makes identifying the controllers challenging. It involves sensitive data, with protection responsibilities. Rules vary by country and change over time. This text is educational and does not replace professional guidance or the official applicable rules.