Barley Laing, UK managing director at Melissa, explains know your business checks and how they can help councils avoid the threat of fraud.

As the number of services local authorities offer online increases, so does the threat from fraud. Despite its convenience there is some risk when offering services in the digital world.

While many in local government undertake know your citizen (KYC) screening to prevent fraud, few are aware of the value of know your business (KYB) checks. With KYB screening you gain knowledge of the sort of company you are dealing with and whether it is, in fact, a legitimate business, sanctioned, or managed by bad actors. It is essential insight that reveals the potential threats of conducting business with an organisation.

To understand why KYB checks are so important look no further than the government’s Bounce Back Loan scheme. Of the £47bn worth loans handed out during the pandemic, £17bn is already expected to be lost with £4.9bn of that figure attributed to fraud. This was due to ‘light touch’ checks by the Government for those businesses applying for loans.

When undertaken successfully KYB screening enables local authorities to fully understand the risks posed by new and existing business users and suppliers. This is important because fraud is frequently committed by shell companies or organisational structures that just don’t exist in reality, so KYB checks can greatly reduce the opportunity for that type of fraud from occurring. Such an approach will also help to prevent financial crime, including money laundering and terror financing, which could result in considerable reputational damage.

Understand the difference between KYC and KYB screening

To effectively deliver KYB checks it’s important to understand the difference between screening for KYB and KYC. The main one lies in the information required to verify identity. With KYB you don’t verify a name, address, date of birth, for example, as is carried out for an individual (KYC), although this data is obviously important for both KYC and KYB checks.

What’s possible with KYB screening?

It is essential to have knowledge of what’s feasible with KYB checks. For a reliable and cost-effective approach to KYB screening it’s prudent to cross-check the company name, address, business registration number, and operational status. Those who want to deliver a more in-depth KYB screening process, which includes identifying any person with significant control – the beneficial owners, the company’s annual returns, or financial statements – must consider the benefits against the often significant cost of doing so.

Access a global business register / regulator data

For effective KYB screening councils need to access leading business registry and regulator data streams, such as Companies House data in the UK. They should acquire data from these sources, not only in their own country, but globally to ensure best practice checks and protection. Source a SaaS eIDV platform

To implement successful KYB, along with KYC screening, it’s best to obtain a comprehensive software-as-a-service (SaaS) electronic ID verification (eIDV) platform. They are straightforward to deploy, scalable, and support real-time cross-checks against an individual's contact data as an online application or sale is completed, to ensure the user experience isn’t negatively impacted.

The platform sourced must have access to reputable global data streams, such as government agency, credit agency and utility records, to match the name, address, date of birth, email, or phone number, along with recognised sources of business data, such as from a business registry or regulator, to confirm ID.

The service should also offer mortality screening checks to effectively confirm the ID of an individual and be able to highlight any errors in the data, such as a typo in the address, which can easily be corrected.

It is also preferable that the platform offers access to worldwide sanctions and politically exposed person (PEP) data, as well as adverse media checks of both individuals and businesses to provide a full ID verification service.

Such an integrated eIDV platform, with all this data and functionality in one place, provides economies of scale for those who use it, while protecting tight budgets against scammers.

Local authorities can no longer ignore KYB with fraud on the increase. Ideally, they should undertake KYB checks while using a full-service SaaS eIDV platform because of the fraud protection and cost benefits it offers.