KYB in Different Industries: Tailoring Your Approach for Maximum Effectiveness

In a highly dynamic and regulatory controlled world, Know Your Business (KYB) processes are essential for maintaining transparency and trust across many industries. As you would expect, each industry has to protect itself from unique threats, requiring tailored KYB strategies to effectively meet compliance demands while also optimising internal efficiency.

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The ability to adapt KYB processes to specific situations is essential. This article will look into the challenges faced by specific sectors including finance, e-commerce and health when trying to onboard and verify their customers.

What industries need to have comprehensive KYB checks in place?

• Finance: Adhering to stringent Anti-Money Laundering (AML) measures requires the collection of specific customer data including company credentials, financials and organisation structures.
• E-commerce: Speed is a necessity when dealing with high-volume transactions. Merchants need to have their identity verified rapidly.
• Health: Requires robust vendor verification and in-depth supply chain management.

KYB in different industries:

Finance: Rigorous Compliance and Sophisticated Data Handling
In the finance sector, KYB is essential for preventing financial crimes such as money laundering and terrorism financing. Financial institutions face the challenge of conducting thorough due diligence, which includes verifying identities and analysing financial transactions of various business structures. One essential part is confirming the identity of the ultimate owner of the company, which can be obscured through shell companies. The complexity of these structures necessitates sophisticated systems capable of detailed and continuous monitoring.

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An ensured KYB process is vital as the estimated amount of money laundered globally each year is between $800 billion to $2 trillion, according to the United Nations Office on Drugs and Crime. Despite advances, a Thomson Reuters survey indicates that over two-thirds of financial institutions struggle with the increasing costs and complexities of KYB compliance, driven by evolving regulations and technological needs.

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E-Commerce: Enhanced fraud prevention

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KYB processes in the e-commerce sector are pivotal for mitigating risks such as fraudulent activities and the exploitation of online platforms for illicit purposes. E-commerce businesses including marketplaces must ensure the integrity of the merchants on their platforms. This requires rigorous identity verification and analysis of their business activities. This scrutiny helps prevent the platform from being used as a conduit for money laundering, especially in a sector characterised by high-volume, low-value transactions. According to a report by CyberSource, fraudulent attempts in e-commerce transactions have been on the rise, with as much as 27% of revenue being at risk due to fraud annually.

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To counter these risks, e-commerce platforms increasingly rely on advanced analytical tools to trace and verify merchant activities across borders. However, a study by LexisNexis Risk Solutions highlights that for every dollar of fraud loss, e-commerce merchants typically spend $3.36 in transaction costs, reflecting the high economic impact of maintaining rigorous KYB processes amidst evolving digital commerce regulations.

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Health: Robust vendor verification and supply chain management

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KYB is increasingly relevant in the healthcare sector, where it serves to combat fraud, prevent financial losses, and maintain the integrity of supply chains, particularly in pharmaceuticals and medical equipment. Healthcare organisations must ensure that their vendors and partners are legitimate and compliant with health regulations to avoid breaches of trust and financial penalties. 

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However, the implementation of comprehensive KYB measures in healthcare is challenging due to the vast and interconnected nature of healthcare supply chains and the technical complexity of medical products and services. The American Health Information Management Association highlights that nearly 40% of healthcare providers struggle with the administrative burden of compliance, indicating the need for more efficient systems and better integration of technological solutions in the KYB processes.

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Real Estate: Diligent background checks and financial tracing

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While initially it may seem that real estate is more relevant on a personal/consumer level the complexity of property ownership structures and input from international investments especially in larger property firms means that KYB is also essential. 

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Research from the Financial Action Task Force (FATF) suggests that over $1.6 billion of illicit funds were funnelled through real estate transactions in the past year alone, highlighting the sector's vulnerability to financial crime.

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KYB is essential for preventing the laundering of illicit funds through property transactions, which are often high-value and can easily obscure the origins of substantial amounts of money. Firms are required to perform in-depth due diligence on their clients, including identity verification and the tracing of funds used in property purchases. 

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Despite the critical nature of these checks, many in the real estate industry face challenges in implementing effective KYB processes, According to a Global Witness report, approximately 75% of real estate firms find it difficult to meet the compliance costs associated with KYB, often due to the need for specialised tools and training in financial forensics.

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Tailoring Strategies for Industry-Specific Needs

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Beyond these sectors, KYB must be adapted to the specific needs of various other industries. For instance, technology companies require robust systems to protect intellectual property and prevent data breaches. Whatever the industry, each one can benefit from a customised approach that considers its unique regulatory environment.

Detected, reinventing KYB.

By staying informed and proactive, businesses can ensure that their KYB strategies are both compliant and strategically advantageous. However, using a sophisticated KYB provider is the best way to maintain robust KYB protocols. This proactive approach will safeguard businesses against emerging risks and enhance their competitive position in the market.

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Detected can be used as a complete end-to-end platform or seamlessly integrated via API to existing systems such as Salesforce. Automation bought into the process represents a new era of intelligence and efficiency for business onboarding. With Detected, the KYB process is formed of three key stages:

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Onboard:
Accelerate the onboarding process for the right customers, for the right product, wherever they are, helping you get to revenue faster and more efficiently.
Components: Customer UI / onboarding flow builder.

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Verify:
Automate the approval of the low-risk customers and capture additional data to verify and validate where compliance needs are more complex or customer value demands it.
Components: AI, Rules engine and RFC data ecosystem.

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Protect:
Ongoing monitoring, protection and alerts when the status of a customer changes is as important as the onboarding stage.  Empower all teams to see changes either via the Case Management or direct into your own systems, such as salesforce or CRM.
Components: Detected Case Management, API, Alert Monitoring, Salesforce/CRM connection.

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To find out more about how Detected can support your business, please get in touch here.

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