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There was once a time in banking when a simple toaster oven was all it took to win business. The “free gift for a new account” brought traffic to bank branches long before ATMs were in every convenience store, drug store, and standalone vestibule. The toasters also served as a brand differentiator before interest rates were deregulated in the 1980s and favorable pricing took the place of a gratis appliance.
Though garden tools and kitchen crockery still have a following for smaller banks – and enable in-person secure verification for onboarding – remote technology and the widespread comfort with the digital identity process have changed the game for many banks and financial institutions.
And just like avocado toast, remote onboarding for KYB is also here to stay.
Introduction to remote KYB onboarding
Banks, financial institutions and a growing number of industries must adhere to various anti-money laundering (AML) and anti-fraud regulations centered around due diligence practices that take place before entering a transaction relationship. Where these once onerous and time-consuming processes could only be completed in person, technology and regulatory compliance changes have enabled most standard KYB and KYC onboardings to be completed remotely. And, though the highest risk clients could still require some form of in-person confirmation, a remote process can greatly improve efficiency.
What is KYB?
Know Your Business (KYB) is the due diligence practice used when a customer is a business. The primary objective of KYB is to drill down to the individuals who own, control, or own and control the business. Companies are generally responsible for identifying the owners of 10-25% or more shares of each customer. Once confirmed, each of these Ultimate Beneficial Owners (UBOs) undergoes a KYC review.
What is KYC?
Know Your Customer (KYC) is the process that banks, financial institutions, and a growing list of other companies use to determine and verify the identity of individuals. KYC, at its core, involves collecting and screening a customer’s identity using a standard form of government identification. Pending the results of the screening, further due diligence may follow.
The level and intensity of the review is primarily dictated by industry and geography of a business. KYC reviews are also completed periodically or as information changes, such as if there is a name change or an ID expires.
Many banks use “KYC” as the umbrella term for both KYC and KYB, as well as the Customer Identification Process (CIP) to verify the existence of a business, its location, and other formation details. They frequently use Customer Due Diligence (CDD) to confirm additional risk-related information such as source of funds, expected transactions, etc.
The role of remote KYB in today's digital world
The growth of digital-only businesses with an increasingly broad global footprint, especially in light of the coronavirus pandemic in 2020, have made remote KYB a technological reality for most businesses today. Even brick-and-mortar businesses have business partners who rely on digital onboarding.
Regulatory landscape
Globally, AML requirements vary widely by country, industry, and risk. And they are changing quickly to keep pace with emerging risks from crafty criminals as well as verification trends. They are also adjusting to make remote KYB more possible.
For example, in Germany, KYB can be largely completed for a standard corporate entity with just a downloaded excerpt from a commercial or cooperative register (Handelsregister) that is filed with the federal government. In addition to company information, these forms typically also include the names of controllers and owners.
In India, citizens can use their Aadhaar IDs, which include biometric information, to fully complete most KYC processes completely online, which could be helpful if an individual is a UBO. Some banks even allow for limited banking to be completed with just proof of an Aadhaar.
Key components and technologies of a remote KYB process
The KYB process is dependent on many factors, most importantly regulatory requirements, a company’s compliance budget, and its risk appetite, but the basic steps follow a standard flow:
- Collect business information and supporting documents and store in a centralized repository with digital security features to ensure that local regulations are followed
- Complete identity verification by running information through various issuing and authoritative databases and confirming that documents are legitimate. Searches can include tax number verification with governments, global sanctions watchlists, Politically Exposed Persons (PEP) databases, adverse media, and more.
- Confirm and verify beneficial ownership
- Report findings and escalate discrepancies, red flags, and other findings as necessary for manual reviews and approvals
Challenges and solutions in remote KYB implementation
If you are deciding where to implement a remote KYB program, know that this is only the first of several onboarding challenges you will face. Choosing to create an in-house solution? You take on the responsibility of hiring and designing the system, fully managing global compliance and technical requirements, and all associated costs.
Choosing instead to bring in an external partner? While a plug-and-play solution might meet your immediate needs today, if your client base grows in size, complexity, and geography, you could soon outgrow them. Flexibility and configurability will matter in the long-term.
Consider the importance of KYB best practices like global expertise and nimble responsiveness as well as the centralization and level of customization your operation needs.
Case study: Twilio partners with Persona to build a more scalable, automated KYB and KYC process
Twilio is the customer engagement platform that helps brands drive real-time experiences through its data platform and communication APIs. As a CPaaS company operating across more than 180 countries and regions, Twilio is subject to many local telecommunications regulations and rules requiring verification of business and individuals using its services.
Hundreds of Twilio employees were responsible for reviewing, cross-checking, and escalating manual client verifications, a process that was becoming increasingly difficult to manage. Seeking inspiration from peers in fintech, Twilio turned to Persona’s KYC and KYB technology to automate time-intensive work, seamlessly verify businesses and individuals, and comply with global regulations.
Persona’s configurable platform approach and technical sophistication was a perfect match with Twilio’s technology, enabling the team to go from concept to launch in less than six months. Twilio embedded Persona into its own platform and is now able to collect customer information via an inquiry template using Persona’s no-code editor, Dynamic Flow . And Persona can now verify identification and other documentation submitted via API or Twilio’s own platform. Through Persona, Twilio can build and launch products faster and quickly adjust to changing regulations.
Partnering with Persona for success
If your company is growing faster and farther than your current identity and compliance solutions can manage, it might be time to partner with a KYB-KYC expert trusted by Twilio, WeTravel, and Branch, and other leading companies across industries.
Here at Persona, we’ve designed our identity infrastructure to be flexible and easy to integrate so that you can build the verification workflows you need to onboard businesses quickly, seamlessly KYC UBOs, and ensure global compliance with KYB regulations.
With our expansive library of verifications, you can quickly and easily collect and analyze government IDs, other documents, and even mobile driver's licenses and NFC passports. Running reports, such as watchlist screenings, PEP scans, adverse media reports, and other database queries allows you to build out a fuller picture of individuals or entities. For additional risk signals, you can passively assess the phone numbers and email addresses that prospective customers provide. Use Workflows to reap the benefits of automation, such as aligning KYB with KYC and automatically sending links to customers to complete KYC after UBOs are identified. With Graph, you can uncover and proactively block money launderers and other known individuals in their network.
Interested in learning more? Start for free or get a demo today.
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