Know Your Business (KYB) is how companies verify that another business is legitimate and safe to work with. As regulations tighten and more business relationships stretch across borders, KYB checks have grown in importance. KYB checks are now a core part of compliance, risk management, and business identity verification.

Below, we explain how KYB works in practice, what information it involves, and how companies keep KYB data current through shifting risk levels and changes in ownership.

What’s in this article?

• What is Know Your Business (KYB)?
  
• How does KYB work?
  
• What types of businesses are required to perform KYB?
  
• Why do companies need KYB checks?
  
• How are beneficial owners identified during KYB?
  
• How are KYB checks updated?
  
• How Stripe Atlas can help
  

What is Know Your Business (KYB)?

KYB is the process companies use to verify that another business is real, legitimate, and safe to work with. It looks at who is behind the company in question and whether they’re trustworthy.

How does KYB work?

KYB uses reliable sources to collect and verify facts about a business. It also keeps the information up to date as the relationship evolves.

Here are the steps:

• Collect business details: A reviewer will start the KYB process by gathering core information about the business in question, such as its legal name, registration number, jurisdiction, address, and legal structure. This information is then checked against official business registries to confirm the business exists and is active.

• Review documents: The business will be asked to provide paperwork, such as incorporation documents, articles of association, and relevant licenses or permits. Reviewers use these to confirm how the company is set up and whether it is properly authorized.

• Map ownership: KYB requires the identification of directors, controlling parties, and beneficial owners. This is done by tracing ownership through any parent companies to learn who ultimately controls the business. Once identified, these individuals undergo identity checks.

• Screen for elevated risk: The business and its associated individuals are screened against sanctions lists, politically exposed person lists, and media sources to flag legal, regulatory, or reputational risks.

• Assess overall risk level: Verified information is evaluated to determine the business’s overall risk profile. This assessment also considers industry, geography, transaction patterns, and ownership complexity. Businesses deemed higher risk might require additional vetting steps, such as a deeper financial review, an analysis of funding sources, or senior compliance approval.

• Retain records: KYB findings, supporting documents, and approval rationale are recorded and stored to meet regulatory requirements and support any future audits.

• Monitor over time: After onboarding, the business is regularly monitored for changes in ownership, activity, or risk signals. KYB information is updated when significant changes occur.

What types of businesses are required to perform KYB?

Whether a business needs to perform KYB depends on several factors. One important consideration is the role a business plays in moving money or value.

Here are some types of businesses that must perform KYB:

• Banks and credit institutions: Financial institutions are required to perform KYB on business customers before they open accounts, issue them credit, or provide them with ongoing financial services.

• Payment service providers and fintech platforms: Companies that facilitate payments, money movement, or business services must perform KYB on the businesses using their platforms.

• Crypto and digital asset service providers: Exchanges, custodians, and other crypto-related businesses are subject to KYB requirements.

• Trust and company service providers: Firms that form companies, provide registered offices, or manage corporate structures are required to verify the businesses and individuals they support.

• Legal and financial services: Lawyers, accountants, auditors, and tax advisors often perform KYB when they execute transactions or manage client funds.

• Businesses in high-risk or high-value sectors: Gambling, real estate, precious metals, and luxury goods businesses must often verify corporate counterparties.

• Platforms onboarding third-party sellers or partners: Even when it’s not explicitly mandated by law, many marketplaces and B2B platforms perform KYB to manage fraud risk and meet partner expectations.

• Any business subject to Anti-Money Laundering (AML) or sanctions laws: KYB is typically part of due diligence obligations for companies covered by Anti-Money Laundering, sanctions, or financial crime regulations.

Why do companies need KYB checks?

Many businesses operate across borders and through layers of legal entities. KYB is a way for these companies to manage risk as they deal with one another.

KYB checks help businesses to:

• Meet regulatory obligations: Businesses in regulated industries are often legally required to verify the identity and ownership of the companies they work with before they provide services. Failing to perform adequate KYB can lead to regulatory penalties, enforcement actions, and even liability if a company is later linked to illicit activity.

• Prevent financial crime: KYB helps detect and block the shell companies, front organizations, and hidden ownership structures that frequently hide money laundering and sanctions evasion.

• Protect credibility: KYB reduces the risk of doing business with illegitimate or high-risk entities. This prevents damage to customer confidence and brand reputation.

• Enable safer growth: As companies grow and onboard more business customers, KYB provides a repeatable framework for maintaining standards without relying on ad hoc judgment calls.

• Create audit-ready documentation: A well-run KYB process produces clear records showing how decisions were made. This is critical when regulators or partners ask how the business assessed risk.

How are beneficial owners identified during KYB?

Beneficial owners are the real people who ultimately control a business. Sometimes, this control is complicated by layers of legal entities. KYB cuts through those layers to uncover who those owners really are.

KYB starts by applying regulatory thresholds, which determine who qualifies as a beneficial owner. Qualification can be based on ownership percentage, voting rights, or other forms of control, even without equity.

KYB then collects ownership disclosures. Businesses are required to disclose shareholders, parent companies, and control arrangements so that ownership can be fully mapped, from the operating entity up to the individuals at the top. When ownership passes through one or more companies, KYB processes follow the chain until natural persons are identified.

Once they’ve been identified, beneficial owners must complete identity verification, typically by providing government-issued identification and proof of address. Any change in shareholders or control leads to reverification so that records stay up-to-date.

How are KYB checks updated?

Regulations and best practices require companies to refresh KYB data over time and stay up to date as risk levels change.

Here’s how to stay current:

• Apply a risk-based review schedule: Higher-risk businesses might be reviewed more frequently. Lower-risk ones can follow longer review cycles, based on factors such as industry, geography, and transaction behavior.

• Monitor risk signals: Sanctions updates, adverse media, regulatory actions, or unusual activity can surface at any time. If they do, KYB information should be reassessed.

• Follow up on material changes: Changes in ownership, directors, business activity, geography, or transaction patterns should prompt immediate KYB updates.

• Maintain audit-ready records: Document each update with dates, findings, and supporting evidence to demonstrate ongoing compliance.

• Approach KYB as an ongoing process: KYB ensures business relationships remain transparent and compliant. Treat it as a continuous effort rather than a one-time endeavor.

How Stripe Atlas can help

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