Introduction
What is one of the most important parts of ethical business practice? Knowing who you are doing business with. While many people in the business world are ethical, there are those who are not ethical and work to bypass the law by laundering money and other illegal business practices. In order to ensure safety for everyone, the identity of a business and their customers must be checked when a financial service provider is handling their money.
KYB, or Know Your Business, is a process that allows a financial service provider to verify the identity and validity of that business. KYC, or Know Your Customer, is a process that allows a financial service provider to verify the identity of the customers that use their services. KYB and KYC are established processes for financial institutions and financial service providers as part of a larger AML, or Anti-Money Laundering effort.
These processes are a set of common procedures used throughout the industry to verify legitimate business partners, and ensure that ethical business practices are followed every step of the way. Combating money laundering is important so that financial networks and systems do not become corrupted by bad actors seeking to use and generate funds to support illegal activity.
What is KYB?
KYB, or Know Your Business, is a process where the identity of a business is verified. The process itself is a set of requirements that involves submitting information about the company, authorized user information, shareholder information, and financial compliance information.
The way that the KYB process is implemented differs from company to company. For Rapyd, the KYB process is initiated by submitting a KYB form after signing up for a Client Portal account. The Client Portal is a hub that allows users to manage their payments and payouts in a no-code environment. When logged into the Client Portal, you click on the Activate Your Account tab and complete the provided form.
The KYB form is sent to the Rapyd Compliance Team. The Compliance team performs the due diligence of reviewing the submitted information and verifying it. The Compliance team also checks that the submitted information fulfills the local regulations for the country where the account is being opened. For example, the required information for KYB may differ slightly from country to country.
The KYB process may take up to 30 days for application approval. When the KYB application is approved, your account becomes fully activated. This enables you to use Rapyd’s products and services to collect payments and make payouts using real funds. In the event your KYB application is rejected, then your business will not be able to work with Rapyd. A list of restricted businesses that cannot work with Rapyd can be found here.
If your submitted application is missing any information, the Compliance team will reach out to you. When the businesses that seek to work with Rapyd are verified, an open and honest business relationship can be established.
What is KYC?
KYC, or Know Your Customer, is a process that allows a financial service provider to verify the identity of the customers that use their services. The customer provides a personal ID in addition to a few personal details in order to verify their identity.
A business that has an account with Rapyd can easily perform the KYC process for their customers in a variety of ways. One way is through the Hosted Identify Verification Page. This hosted page is generated through the Rapyd API, and can be embedded in websites or your product offering.
This form allows you to collect personal information from your customers in order to protect their identity. This personal identification information, or PII, is tokenized and stored securely. The type of information collected for KYC involves personal information such as the address, country, date of birth, and a photo of their personal ID.
Another way to follow KYC is to use the Verify Identity API call. The Rapyd API can be used to process personal identification information that Rapyd can verify for you.
Once the information is verified, Rapyd sends you a webhook with the verification details.
Meeting Regulatory Requirements and the User Experience
AML, or Anti-Money Laundering processes inform the need for KYB and KYC in the financial world. Within financial networks, the goal is to prevent those networks from being used to launder money.
To summarize, money laundering is a process through which illicit funds are introduced into traditional financial networks and institutions through three steps: placement, layering, and integration. The source of the illegal money is hidden, while giving the money the appearance that it was generated through a legitimate source. This involves the funds being joined with the revenue streams of legitimate businesses and accounts, or using a vehicle such as an asset or a shell corporation to avoid tax and regulatory requirements.
Money laundering thrives on anonymity and dishonesty. The easier the funds can be moved from one account to another without detection, the lower the risk for criminals.
In order to combat money laundering efforts, the KYB and KYC processes disband anonymity through identity verification, which helps detect bad actors before they can use these financial networks to their advantage.
But in order to increase the adoption of the KYB and KYC process, the user’s experience must be considered. Financial service providers need to make this required process as seamless as possible in order to increase user adoption, and provide a smooth experience. The need to meet regulatory requirements must be balanced with the needs of the users that fill out these detailed applications.
Through integrating the KYB process with the Client Portal, Rapyd provides a one-stop-shop for businesses to meet their account management needs when working with Rapyd.
Conclusion
The KYB and KYC processes enable financial service providers to determine who they should form business relationships with. These processes are followed in order to combat money laundering through AML or Anti-Money Laundering efforts.
When working with Rapyd, a business simply needs to sign up for a Client Portal account here and submit their KYB application. The Rapyd Compliance team reviews the information, and accepts or rejects the application.
Rapyd provides several options for other businesses to perform KYC checks: they can use the Rapyd API, or use the Hosted Identity Verification page.
These mandatory processes help to keep everyone safe and aid financial service providers in maintaining ethical business practices.