Know Your Business (KYB) is the term for customer due diligence as applied to corporate and other legal-entity customers (companies, partnerships, trusts and similar arrangements) as opposed to individuals. Under Regulation 28 of the Money Laundering Regulations 2017, a firm onboarding a corporate customer must identify and verify the entity itself and, critically, identify the beneficial owners who ultimately own or control it. Where there is doubt that a person is the beneficial owner, the firm must take reasonable measures to verify their identity.
Why KYB matters
Corporate structures are the most common vehicle for concealing the proceeds of crime, because layers of companies and nominee arrangements can obscure who really benefits. KYB is the control that forces firms to look through the structure to the natural persons behind it. Failure to identify beneficial owners is one of the most frequently cited weaknesses in FCA AML enforcement, because it undermines every downstream control, including sanctions screening and PEP identification.
What KYB involves
In practice KYB covers verifying the entity’s legal existence and status (for example through company registers), understanding its ownership and control chain, and identifying beneficial owners, generally those holding more than 25% of shares or voting rights, or who otherwise exercise control, under Regulation 5. Firms also assess the entity’s purpose and business, and apply enhanced due diligence where the structure is complex, opaque, or connected to high-risk jurisdictions.
Who it applies to
All regulated-sector firms onboarding corporate or legal-entity customers under the MLRs 2017, including relationship managers, onboarding teams and financial-crime functions.
Related terms
Beneficial ownership, CDD and EDD.