The market for Know Your Business (KYB) services – such as business verification, beneficial ownership identification, and risk assessment for business entities and their beneficial owners – is projected to grow to $11.8 billion by 2022. This projection comes from OWI Labs in their recent report, “Know Your Business: $12 Billion Reasons You Should Care.”
The report comes at a time when interest in KYB is quickly gaining traction. Government regulators are increasingly requiring more stringent business verification and ultimate beneficial ownership checks such as 4AMLD in Europe and the upcoming FinCEN Final Rule in the U.S.
Some findings and topics examined in the report include:
- The total global KYB addressable market – as of 2017, the value of the market is estimated at $5.6 billion with an annual growth rate estimated at 16 percent, adding up to a market size of $11.8 billion in 2022
- Reasons why the market is expanding now and why the expansion is expected to continue
- The high costs associated with meeting KYB requirements
- How technology applications can reduce the cost of compliance
Need to know more information about KYB? Here’s a quick overview on what it is and why it is important for business-to-business relationships.
The Need for Business Verification
In many jurisdictions, there are strict requirements for proper Customer Due Diligence (CDD) and adherence to Know Your Customer (KYC) rules for businesses opening accounts. For example, in the EU, the new 4AMLD rules took effect in June 2017 and in the US, the FinCEN Final Rule is coming into full effect in May 2018. While the exact rules depend on the specific jurisdiction and industry your business operates in, there are two general considerations:
1) Verifying business details, to obtain and verify company vitals of the applicant such as:
- Registration Number – business registration number
- Business Name – the name of the company
- Business Status – operation status of the company
- Address – the physical address where the company is operating
- Managing Directors – this may include key management personnel of the company
- Date of Incorporation – the day, month, year of the company’s incorporation
2) Verifying ultimate beneficial ownership (UBO)
Once you have the company vitals, you need to perform a risk assessment to determine if Enhanced Due Diligence (EDD) is necessary. Depending on the applicant’s industry, the countries they operate in, the value of transactions, the volume of transactions, and other risk factors, an EDD check might be in order.
If so, then steps must be taken to ensure you know the UBO of that business – the people who make decisions and benefit from it. According to the FATF, “beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.”
Problems With Traditional Business Verification
While the regulations for business verification are becoming more rigorous, these procedures are not entirely new. Financial institutions (FIs) always needed to look at business documents. They’d want an applicant to come in with all their business records. They’d pore over the documents manually, make copies, make notes, pass them on to other departments, get responses, ask the applicant back in for clarification, and around the merry-go-round it went.
This manual-intensive process is slow, expensive and frustrating, both for the FIs and for the business applicants. To give some specific numbers, a Forrester Consulting survey found that it cost up to USD $25,000 and it took up to 34 weeks go through the AML and KYC onboarding process.
Need more information on KYB? Find out more here…
Trulioo Whitepaper: Who Are You Doing Business With?
Download our comprehensive guide to business verification and ultimate beneficial owners (UBOs). Learn the importance of verifying the identity of businesses that you interact with, and how advancements in digital technologies and virtual data sets can assist in solving verification challenges.
Trulioo offers a business verification solution to help you meet your KYB needs. For more information, download our Global Business Verification Brochure.
About OWI Labs
OWI Labs is an independent identity research company focused on cybersecurity, digital commerce and risk management. They help businesses, investors and governments stay ahead of market trends so these entities can build sustainable, forward-looking identity-enabled products and strategies.