In a world where compliance acronyms fly around like buzzwords, KYC (Know Your Customer) and KYB (Know Your Business) often get lumped together as interchangeable checkpoints. They’re not. And the difference between them could determine whether your company is secure, compliant, and scalable or vulnerable, penalized, and exploited.
Data from Juniper Research shows that over the next five years, losses from online payment fraud will cost businesses over $362 billion. They note that in 2028 alone, losses are expected to be $91 billion, which is an astronomical sum.
As fraud tactics grow more sophisticated, so must our systems. And that starts by understanding the distinct roles these two frameworks play. Let’s explore this further below.
What KYC and KYB Actually Mean (And Where They Diverge)
As we touched on, the main distinction is simple on the surface: KYC verification deals with people while KYB verification deals with businesses. But dig a little deeper, and the complexity explodes.
KYC usually involves collecting and verifying documents like IDs and proof of address. It’s about making sure the person you’re dealing with is who they say they are. This works well for banks, crypto platforms, or mobile wallets onboarding individuals.
On the other hand, AU10TIX explains that KYB involves collecting and verifying documents, typically of the corporate kind. Think business registrations, tax statements, and more. Most importantly, it verifies the ultimate beneficial owners (UBOs).
This is where the waters get muddy. Many fraudulent operations set up legitimate-looking shell companies that are layers deep in holding structures across multiple jurisdictions, intentionally designed to obfuscate real ownership.
If one needs proof of how common this is, just look at the fact that in over 2,265 shell companies, the directors were 123 years old and above. Meanwhile, the oldest human known to live was 122.
As you can imagine, when KYB is done right, it peels back these layers of absurdity. But it’s a slow, complicated process that involves business registries, cross-border legal frameworks, and AI-enhanced risk scanning.
Knowing who someone is matters. But knowing who they work for and who’s behind the business can matter even more.
Why KYB Is Now a Bigger Deal Than Ever
Once upon a time, fraudsters pretended to be other people. Now, they just create fake companies. Shell corporations, fictitious vendors, and synthetic entities are being used not just to launder money, but to gain access to real platforms, contracts, and partnerships.
The escalation of this tactic has put KYB at the center of regulatory evolution. Globally, countries are aligning KYB requirements in response to leaks like the Pandora Papers, which occurred a few years ago.
You may have heard about it in 2021, over 3 terabytes of data containing 12 million files that implicated countless businessmen, executives, celebrities, and criminals. The International Consortium of Investigative Journalists (ICIJ) noted that over 35 current and former world leaders, along with 330 politicians, were exposed in the leak.
Unlike KYC, which is fairly standardized across the globe, KYB compliance is highly fragmented. Different countries and jurisdictions have different rules, and some (like offshore tax havens) have no rules at all. This is why digital KYB systems now lean heavily on automation, open registry APIs, and continuous monitoring to stay ahead.
And yet, many B2B platforms still rely on one-time manual KYB verification during onboarding. That’s a problem because a company that looks legitimate today could be bought, dissolved, or linked to illicit activity tomorrow.
What Happens When You Get This Wrong (or Right)
Failure to get KYB right can be expensive. Just ask any of the global banks fined billions for onboarding shady shell companies or failing to detect ownership changes. HSBC, Danske Bank, and Deutsche Bank have all paid the price in fines over the years for these reasons.
That said, you do end up paying one way or the other. Most businesses are now having to set aside money for either compliance or DORA programs. (The latter being something that businesses in Europe need to deal with.)
For instance, McKinsey & Company point out that most surveyed institutions plan to spend anywhere between €5 million and €15 million on DORA compliance. Many businesses also claimed that meeting DORA requirements will result in permanently higher costs for technology and technology control.
In other words, today’s KYB tech landscape is evolving fast. This is partly why tools are being developed to offer real-time KYB checks. These allow for ongoing monitoring and can flag any changes in ownership or legal status. This continuous approach is a departure from old-school, paper-heavy processes, and it clearly needs to become the norm at the earliest.
Frequently Asked Questions
1. Is KYB mandatory?
Yes, in most regulated industries, KYB is absolutely required—especially for banks, fintech companies, and marketplaces dealing with other businesses. It’s part of anti-money laundering (AML) rules. If you’re working with other companies, regulators expect you to know exactly who you’re dealing with.
2. What are the consequences of KYB non-compliance?
Skipping or mishandling KYB can hit hard. We’re talking massive fines, legal trouble, and losing your license to operate in some cases. Even worse, you could unknowingly work with criminals or shady shell companies, which can destroy your brand reputation fast.
3. Who enforces KYB and KYC?
Different regulators handle this depending on where you are. In the U.S., it’s mainly FinCEN. In Europe, you’ve got watchdogs like the EBA and national regulators. Basically, financial authorities across the world are the ones making sure companies follow KYC and KYB rules.
Essentially, the real value of KYB lies in what it prevents you from missing. It protects you not just from fraud but also the reputational damage and operational chaos that follow when you’re blindsided by who you’ve let in. So, it’s less about avoiding bad outcomes and more about preserving the integrity of everything you’re building: your partnerships, your customer base, your future.
What KYB asks from you is discipline: to dig deeper, to stay current, and to stop thinking of verification as a task to complete and forget. Because the moment you treat it that way is often the moment something slips through. In a world of increasingly sophisticated deception, that seriousness might be your most underrated asset.
