KYC vs. KYB: The Complete Compliance Comparison (2025 Guide)

The Core Definition

Know Your Customer (KYC) is the mandatory process of verifying the identity of an individual client to prevent money laundering and fraud.

Know Your Business (KYB) is the due diligence process of verifying a corporate entity’s legal status and identifying the Ultimate Beneficial Owners (UBOs) behind it.

While KYC answers the question “Who is this person?”, KYB answers “Is this business legitimate, and who actually owns it?”

In the world of fraud prevention and risk management, the acronyms often blur together. However, confusing KYC (Know Your Customer) with KYB (Know Your Business) can lead to significant regulatory fines and dangerous gaps in your security.

Whether you are a fintech startup looking for a PAYG solution or an enterprise bank needing automated batch screening, understanding the distinction is the foundation of a robust AML (Anti-Money Laundering) program.

Here is the definitive guide to the differences, requirements, and workflows for KYC and KYB in 2025.

Key Takeaways

  • Target: KYC targets individuals; KYB targets corporate entities.
  • Connection: KYB is the “parent” process—you must verify the business first, then perform KYC on the individuals (UBOs) who own it.
  • Complexity: KYB is significantly more complex as it requires “unwrapping the corporate veil” to find hidden owners.
  • Automation: Modern APIs can now automate both processes in real-time to reduce friction.

What is the difference between KYC and KYB?

While both processes share the same goal – preventing financial crime – they require different data points and checks.

The Goal

  • KYC: Verifies that a person is who they say they are and assesses their personal risk level (e.g., are they a PEP?).
  • KYB: Verifies that a business exists, is active, and is not a shell company used for money laundering.

The Documents Required

  • KYC: Government-issued ID (Passport/Driver’s License), Proof of Address, Liveness Check (Selfie).
  • KYB: Certificate of Incorporation, Articles of Association, Register of Directors, Proof of Operating Address.

The Complexity

  • KYC: usually a linear, one-to-one check.
  • KYB: A “one-to-many” check. A single business might have five directors and three major shareholders, all of whom need screening.

What is Know Your Business (KYB)?

KYB is often referred to as “Corporate KYC.” It is critical for B2B companies, marketplaces, and financial institutions dealing with corporate clients.

The most difficult part of KYB is identifying the Ultimate Beneficial Owner (UBO).

What is a UBO?

A UBO is the actual human being who ultimately owns or controls the company. Criminals often hide behind layers of shell companies to obscure their identity.

The “25% Rule”
In most jurisdictions (including the UK, EU, and Australia), a person is considered a UBO if they own or control more than 25% of the company shares or voting rights.

A standard KYB workflow involves:

  1. Verification: Validating the company registration number (CRN) against official government registries.
  2. Unwrapping: Analysing the corporate structure to find the individuals who own >25%.
  3. Screening: Running those individuals through PEP & Sanctions lists and checking for Adverse Media.

What is Know Your Customer (KYC)?

KYC is the process most consumers are familiar with. It applies to B2C relationships.

A standard KYC workflow involves:

  1. Identity Verification (IDV): Scanning a passport or ID document to ensure it isn’t forged.
  2. Biometric Check: Using a “liveness” selfie to ensure the person holding the ID is the same person in the photo.
  3. Watchlist Screening: Checking the name against global Sanctions lists and Politically Exposed Persons (PEP) databases.

How KYC and KYB Work Together

You cannot have an effective B2B compliance program without both. They are not separate silos; they are part of a continuous chain.

The Process Chain:

  1. A new corporate client applies for an account.
  2. KYB Check: You verify the business is real.
  3. UBO Discovery: You identify that “John Smith” owns 40% of that business.
  4. KYC Check: You perform a KYC check on “John Smith” to ensure he isn’t a sanctioned individual.

If you only perform KYB (checking the company name) but ignore the KYC on the owner (John Smith), you could inadvertently onboard a company owned by a known money launderer.

Automating Compliance: Enterprise vs. PAYG

In the past, these checks were manual, slow, and expensive. Today, automation allows businesses of all sizes to manage risk without slowing down growth.

For Startups & SMEs (PAYG)

If you are onboarding a low volume of merchants or clients, you don’t need a massive compliance team. A Pay-As-You-Go (PAYG) solution allows you to:

  • Instantly screen a business or individual via a web portal.
  • Get “Green/Red” results in seconds.
  • Only pay for the checks you use.

For Enterprise (API Integration)

Banks and large platforms require scale. An Enterprise API solution allows you to:

  • Integrate KYB/KYC checks directly into your user signup flow (White-label).
  • Set custom risk rules (e.g., “Auto-approve low risk, flag high risk for review”).
  • Conduct Ongoing Monitoring to be alerted if a clean customer suddenly appears on a Sanctions list six months later.

Summary

Effective Risk Management requires a holistic view. Whether you are dealing with individuals (KYC) or entities (KYB), the goal remains the same: knowing exactly who you are doing business with.

By leveraging automated tools for ID Verification, PEP/Sanctions Screening, and UBO detection, you can protect your brand from fraud while ensuring a seamless experience for your legitimate users.

Frequently Asked Questions (FAQ)

1. Is KYB mandatory for all businesses?
Yes, if you are a regulated entity. Financial institutions, payment processors, and other regulated sectors (like real estate and legal services) are legally required to perform Know Your Business (KYB) checks on corporate clients to comply with Anti-Money Laundering (AML) laws.

2. Can you perform KYB without KYC?
No. An effective compliance program requires both. You perform KYB to verify the business entity exists, but you must then perform KYC on the Ultimate Beneficial Owners (UBOs) associated with that business to ensure they are not sanctioned individuals.

3. What is the “25% Rule” in KYB?
The “25% Rule” is a global standard used to identify Ultimate Beneficial Owners (UBOs). Generally, any individual who owns 25% or more of a company’s shares or voting rights must be identified and verified during the KYB process.

4. How is KYB different from a credit check?
A credit check assesses a company’s financial health (ability to pay debts). A KYB check assesses a company’s legal status and risk (legitimacy and criminal links). You cannot use a credit report to satisfy AML regulatory requirements.

5. Does KYB apply to Sole Traders?
Technically, verifying a Sole Trader usually falls under KYC rules because the business and the individual are the same legal entity. However, if the Sole Trader is registered as a distinct business name, checks on that registration may be required.

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