KYB & KYB: FullCircl unpacks the what, why & differences

Understanding the difference between KYC and KYB is crucial for businesses navigating the financial landscape. Both KYC/KYB processes are integral to ensuring regulatory compliance and building trust. In this blog, we'll delve into the KYC KYB processes, highlighting their significance and the difference between KYC & KYB in maintaining financial integrity.

KYC meaning

Know You Customer (KYC), or sometimes Know Your Client, refers to the policies and procedures put in place by businesses to manage risk and verify the identities of customers/clients. These are particularly vital to the financial services industry, to ensure compliance with national and international regulations targeting anti money laundering (AML), terrorism financing, fraud, and other forms of corruption and bribery.

Why is KYC important?

In the UK in 2022, 64% of businesses experienced fraud, corruption, or other economic/financial crime. In a world where the risk landscape is constantly evolving, it’s never been more important for businesses to build resilience.

Effective KYC policies and procedures prevent money laundering, reduce the risk of unwittingly embarking upon a relationship with individuals or organisations involved in illegal activity, and keep regulated entities ahead of regulatory requirements.

As well as preventing criminal activity, KYC is also a vital tool in understanding customer needs and preferences, establishing trust, providing superior service, and importantly reducing cost to acquire and serve customers.

How does KYC apply across the customer lifecycle?

The simple answer is, KYC applies at every stage.

• Finding the right customers - pre-screening customers for suitability allows businesses to be confident they are always efficiently pursuing not only the best opportunities, but the ones that best fit their risk profile.
• Onboarding them faster – Effective KYC procedures are mandatory for regulated businesses when onboarding a new customer. Done well they also deliver a positive experience for the customer, and a great first impression for the business.
• Keeping customers for life – KYC enables businesses to identify and mitigate risks sooner throughout the customer lifecycle. A proactive approach through Perpetual KYC (we’ll come on to this later) can simultaneously improve customer retention while increasing upsell opportunities. 

The problem with KYC is that traditionally companies waste vast amounts of money, time, and resource because their KYC processes are inefficient.

According to a 2022 study, financial institutions spend millions of pounds every year inefficiently onboarding and maintaining clients. The survey found that almost 30% of firms dedicate between 31% to 40% of their entire compliance budget meeting their KYC obligations, and that between 1,000 and 2,500 employees work on KYC tasks.

eKYC meaning

Put simply, eKYC is a digitised and automated form of KYC verification, with the capability to verify customers remotely in a faster, more accurate way compared to traditional highly manual KYC processes.

At a time when customers are more demanding and expect fast, streamlined services, eKYC delivers improved customer experiences, whilst reducing manual efforts, improving compliance, and reducing costs.

But KYC does not stop, or at least should not stop after onboarding. It should be a continuous process throughout the customer lifecycle. This is known as Perpetual KYC.

Perpetual KYC meaning

Despite advances in eKYC, there is still a strong reliance on periodic reviews and trigger events to meet regulatory compliance commitments. This brings an ongoing dependency on front line staff gleaning information through their interactions with customers, to identify potential high-risk activity and implement remediation processes.

There is a need for reviews to be more proactive, rather than relying on a reactive approach. To achieve this, regulated businesses need to make the cultural shift towards a perpetual KYC model.

Perpetual KYC (P-KYC) delivers a totally new approach to how banks manage KYC policies and procedures – it’s proactive rather than reactive, and continuously monitors customers throughout their lifecycle.

P-KYC reduces risk whilst optimising compliance resources, reducing remediation costs, and maintaining trust. As market shifts occur, P-KYC also allows businesses to remain one step ahead of customer needs and provides new opportunities to deepen investment in the relationship, offer new services and broaden cover.

There is one last term to throw into the mix…

KYB meaning

KYB verification measures are also necessary when regulated businesses enter into relationships with other businesses as part of a supply chain, stakeholder, beneficiary, or other relationship. In this context, that verification process is referred to as Know Your Business (KYB).

This involves company identification, verification of the information provided by the business and its directors, determining company structure, ultimate beneficial owners, CCJ and legal notices, Anti-Money Laundering checks including PEP’s, sanctions lists, adverse media, and watchlists.

KYB policies and procedures enable regulated businesses to determine the authenticity of the entities they are dealing with, and ensure they are not being used to conceal the identities of owners for illegitimate purposes.

Why is KYB important?

KYB is a critical step in the onboarding of corporate clients. With the complexity of regulation progressing globally, coupled with the risk of money laundering and fraud rising exponentially, it is imperative that businesses conduct the correct Customer Due Diligence (CDD) processes on their clients to identify risks.

By conducting KYB checks, businesses can have peace of mind that the clients they are working with are suitable to their risk appetite whilst complying with regulation and remaining compliant.

Difference between KYC & KYB

The key difference between KYC & KYB is that KYC focuses on verifying the identity of individual customers to prevent fraud, money laundering, and other financial crimes. It involves collecting personal information such as name, address, date of birth, and identification documents.

In contrast, KYB is aimed at verifying businesses and their owners. This process ensures that the business is legitimate and involves gathering details about the company's structure, ownership, and financial status.

Ready to learn more?

We hope we’ve clarified things for you.

FullCircl goes beyond standard KYC and eKYC practices. Using automated data collection, data matching, and execution of critical checks and adverse media monitoring, we deliver improved onboarding and in-life experiences. The result is your business can ensure compliance through proactive risk mitigation, targeting effort where it is needed in line with your individual policies, procedures, and risk appetite.

FullCircl's platform includes KYC software, AML solutions, global KYB, and more. A game-changer in the KYC space, we overlay policy decisioning and risk appetite over that data to provide consistency of decisioning and benefits in KYC advancement.

Get in touch to find out how we can supercharge your KYC - so you can do Better Business, Faster.