KYB plays a critical role in ensuring that companies are dealing with legitimate entities. While verifying the identity of partners is a necessary step in due diligence, it doesn’t begin to scratch the surface of what companies need to truly assess risk and gain a complete picture of a business. Let’s explore how KYB standards are evolving and how companies are making the shift to adopt next-gen KYB processes or what Verdata is calling KYB Plus.
How is KYB changing?
The original KYB standards, aimed at preventing money laundering, are rooted in laws such as the Bank Secrecy Act of 1970 (BSA), the Patriot Act, and the CDD Rule. While the need to stop illicit activities remains important, a multitude of new risks and threats have emerged. The last decade alone has given way to dramatic industry shifts, including but not limited to the rise of embedded finance. Risk is increasing and is now being distributed to new parts of the ecosystem that are, in turn, demanding deeper insights than ever before.
As companies sprint to adjust their business models and processes, they are faced with more questions requiring answers. Is a business reputable, and are they licensed if applicable? Are customers satisfied? Are they likely to be a good long-term partner or will they cause compliance concerns? These are just a few of the criteria needed to evaluate risk in today’s environment and determine whether a partner is the right fit.
Acquiring new and improved partner insights means changes for most businesses. Read on to learn more about the impact the shift is having on companies.
What’s the impact of next-gen KYB on companies?
Companies embracing next-gen KYB standards will mitigate more risk and fraud than their peers. That being said, there are still a few challenges that need to be overcome to reap the full benefit of new and improved KYB Plus:
- A greater number of data sources- Deeper insights require accessing a larger volume of information for a partner. Companies may need to onboard additional data sources to satisfy the growing list of checks.
- More people or more automation- Many checks are performed manually. Verifying an extended list may require more staff or the adoption of automated workflow to lessen the burden.
- Disparate systems- Additional data sources and new workflow solutions could require staff to access separate systems within a single process, decreasing productivity. Selecting the right vendor can solve this issue and oftentimes can result in increased efficiency for the company.
What should companies look for in a vendor?
Choosing the right vendor can help you navigate the transition to KYB Plus. So what should you evaluate when selecting a vendor? We asked companies who’ve already made the leap, and here were the core questions they considered:
- Do they have multiple data sources? KYB Plus will require access to numerous data sources. Prioritize a vendor that facilitates access to a variety of data sources within a single system to save your team time. Also, be on the lookout for vendors that deliver proprietary data that enable new and valuable insights.
- Can they deliver new data sources rapidly?- Are they planning to incorporate additional data sources in the future? As new data sources become available, can they expand access to these data sources with little to no work from you?
- Can they be used across the entire commercial lending lifecycle? – Can the data and analytics be leveraged for initial partner onboarding and ongoing partner monitoring? Do the insights help you mitigate risk and identify opportunities to grow your relationship?
- Do they have an integrated workflow?- House notifications, workflows, and other automation within the same system as the data sources to maximize the insights and functionality available to you.
With risk increasing across the ecosystem, companies adopting the new and improved next-gen KYB standards are seeing substantial benefits. Selecting the right vendor can be helpful in navigating the transition with ease. Here at Verdata, we’re on a journey to support companies looking to make more insightful risk decisions. If you are interested in learning more about our experience and what we can offer, contact us.