KYC Vs KYB

It is helpful to understand the key differences between KYC and KYB. KYC focuses on the identification and verification of individual customers, whereas KYB focuses on legal entities. The current infographic broadly differentiates KYC and KYB, bringing out differences to simplify their relevance and understanding. 

Know Your Customer (KYC) 

• Focuses on Natural Persons 

The purpose of KYC is to identify and verify any natural person who could be a customer, business associate, or supplier.  

• Aims to Verify Identity of Natural Persons 

The purpose of KYC is to verify that the natural person customer is indeed the same person whose identity documents they shared for the purpose of verification and ensure that there is no element of document theft, forgery, or fraud involved with the documents presented for ID verification. 

• Collection of ID Verification Documents  

Generally acceptable types of documents for identity verification and KYC purposes are government-issued ID documents such as follows: 

• • Passport 

• • Emirates ID (UAE) 

• • Driver’s License, etc. 

Know Your Business (KYB) 

• Focuses on Legal Entities 

The purpose of KYB is to identify and verify any legal entity, business or legal arrangement, such as a trust. A business might be a customer, business associate, or supplier.  

• Aims to Verify Legitimacy of a Business / Legal Entity / Legal Arrangement 

The purpose of KYB is to verify that the business or entity proposing to establish a business relationship with the regulated entity is indeed an operational business with a continuing license and is legally permitted to carry on the business. Verifying the legitimacy of a business extends beyond the legal entity itself, according to AML regulations. KYB should ideally encompass the identification and verification of the Ultimate Beneficial Owners (UBOs) or People with Significant Control (PSC) to rule out establishing business relationship with sanctioned individuals or corrupt politicians operating behind the garb or a legal entity.  

• Collection of Business Verification Documents 

• Generally acceptable types of documents for business verification and KYB purposes are government-issued documents such as follows: 

• • Trade License 

• • Certificate of Incorporation 

• • Memorandum of Association and Articles of Association 

KYC Vs. KYB Decoded 

Concepts like KYC and KYB are the building blocks of an AML/CFT compliance framework. Having clarity of these concepts helps with understanding their relevance and purpose more accurately.