KYB: the complete guide to business entity verification

KYB (Know Your Business) is the regulatory process of verifying the identity, legal structure and compliance status of a corporate entity before establishing a business relationship. In the UK, this obligation falls under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), as amended, and is supervised by the Financial Conduct Authority (FCA). While KYC focuses on individual identity verification, KYB addresses the unique challenges of verifying companies, partnerships, trusts and other legal entities that can be used to obscure beneficial ownership and facilitate financial crime.

In the 2023-2024 enforcement period, the FCA issued fines totalling over GBP 176 million for AML failures, with a significant proportion relating to inadequate corporate customer due diligence. The Companies House register and the PSC (Persons with Significant Control) register are the primary public sources for business verification in the UK, though the Economic Crime and Corporate Transparency Act 2023 has substantially expanded verification requirements.

This article is provided for informational purposes only and does not constitute legal, financial or regulatory advice. Consult a qualified professional for questions relating to your specific situation.

What is KYB and why does it matter

KYB (Know Your Business) is the corporate equivalent of KYC. It is the set of checks that regulated firms must perform to verify that a business counterparty is a legitimate, registered entity with transparent ownership and no links to financial crime.

Under Regulation 28 of the MLR 2017, regulated firms must identify and verify the identity of corporate customers, including their beneficial owners and the nature of the business relationship. This goes beyond a simple Companies House search: it requires cross-referencing multiple data sources to build a complete picture of the entity and its control structure.

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduced identity verification for directors and persons with significant control, making Companies House data more reliable. However, firms cannot rely solely on register information and must conduct independent verification.

KYB vs KYC: key differences

KYB and KYC are complementary processes under the same AML framework, but they differ in scope, complexity and cost. The following table summarises the core distinctions.

KYB is inherently more complex than KYC because corporate structures can span multiple jurisdictions with layered holding companies, nominee directors and trusts. Tracing the ultimate beneficial owner often requires navigating registries in several countries.

For a comprehensive overview of the KYC process, see our complete KYC guide for businesses.

The KYB process in the UK: step by step

Verifying legal existence

The first step is confirming that the entity exists as a registered legal person. In the UK, this means obtaining or verifying the certificate of incorporation and checking the company's status on the Companies House register. The register provides the company number, registered office address, SIC code, incorporation date, company type (Ltd, LLP, PLC) and the names of current directors and secretaries.

For foreign companies operating in the UK, the overseas company register shows details of UK establishment registrations. Scottish and Northern Irish partnerships have separate registration requirements that must be checked against the relevant registries.

Identifying persons with significant control

Since 2016, all UK companies, LLPs and Scottish partnerships must maintain a PSC register identifying individuals who hold more than 25% of shares or voting rights, have the right to appoint or remove a majority of the board, or exercise significant influence or control. The PSC register guidance from Companies House sets out the five conditions for PSC status.

Under the ECCTA 2023, Companies House now has powers to query PSC information and require verification. Regulated firms must still perform independent checks, as the register may not reflect recent changes or complex indirect ownership through overseas entities.

Document collection and verification

The following table details the documents required by entity type in the UK.

For vendor and supplier relationships, firms should also obtain evidence of VAT registration, employers' liability insurance and relevant professional indemnity cover. See our guide on vendor compliance certificate verification.

Sanctions screening and adverse media

KYB requires screening the entity, its directors and its beneficial owners against sanctions lists: the UK Sanctions List (OFSI), EU consolidated list, OFAC SDN list and UN Security Council lists. This screening must be performed at onboarding and on an ongoing basis, with particular attention to designated persons and entities under the Russia (Sanctions) (EU Exit) Regulations 2019, which remain actively updated.

Adverse media screening supplements sanctions checks by identifying negative news coverage relating to fraud, corruption, regulatory action or litigation involving the entity or its principals.

Risk assessment and ongoing monitoring

Each verified entity is classified by risk level (low, standard, enhanced) based on objective criteria: sector, jurisdiction, ownership structure, PEP exposure and regulatory history. Enhanced due diligence (EDD) is mandatory for entities operating in high-risk sectors or jurisdictions identified in the UK national risk assessment.

Ongoing monitoring involves tracking Companies House filings (new confirmation statements, changes of directors, charges registered), sanctions list updates and adverse media alerts. The FCA expects firms to maintain a risk-based approach with documented policies and periodic reviews.

Sectors with the highest KYB exposure

All firms regulated under the MLR 2017 must perform KYB on corporate customers, but certain sectors face heightened requirements. Banks, payment institutions and e-money firms process the largest volumes of corporate onboarding. Estate agents conducting transactions above GBP 10,000, accountancy service providers, trust or company service providers (TCSPs) and legal professionals all have mandatory KYB obligations.

The FCA has identified specific high-risk areas including correspondent banking, trade finance, corporate formation services and the crypto-asset sector. Firms operating in these areas must apply enhanced due diligence as standard for all corporate relationships.

Automating the KYB process

Manual KYB verification for a single UK entity takes 3 to 6 hours on average: gathering documents, querying Companies House, cross-referencing PSC data, screening sanctions lists and documenting findings. This timeline is unsustainable for firms onboarding dozens or hundreds of corporate clients monthly.

Automated KYB platforms reduce this to under 15 minutes by integrating directly with the Companies House API, sanctions databases and document verification engines. CheckFile provides a unified document verification platform that handles both KYC and KYB workflows, with automated extraction and validation of corporate documents.

For a sector-specific breakdown of due diligence requirements, consult our customer due diligence checklist by sector.

FAQ

What is the difference between KYB and corporate due diligence?

KYB is the regulatory component of corporate verification mandated by anti-money laundering law. Corporate due diligence is a broader commercial process that includes KYB but also covers financial health assessment, credit risk, operational capacity and reputational checks. KYB is a legal obligation for regulated firms; corporate due diligence also serves commercial risk management purposes.

How often should KYB checks be renewed?

The MLR 2017 requires a risk-based approach rather than fixed timescales. High-risk entities should be reviewed annually, standard-risk entities every two to three years, and any material event (change of director, PSC update, new charges filed) should trigger an immediate review. Continuous monitoring of Companies House filings and sanctions lists enables event-driven reviews between scheduled assessments.

Does KYB apply to sole traders and partnerships?

Sole traders are verified through KYC rather than KYB, as they are natural persons. General partnerships without legal personality are subject to KYC for each partner. LLPs and Scottish limited partnerships, which have separate legal personality, require full KYB verification including PSC identification.

What happens if a firm fails to conduct adequate KYB?

The FCA can impose unlimited fines, public censure, requirements to remediate and, in the most serious cases, cancellation of authorisation. HMRC, which supervises non-FCA regulated firms under the MLR 2017, can impose civil penalties up to GBP 1 million. Individual senior managers can face personal liability under the Senior Managers and Certification Regime (SM&CR).

Can Companies House data be relied upon for KYB?

Companies House data provides a starting point but cannot be relied upon in isolation. Despite improvements under the ECCTA 2023, the register may contain outdated or inaccurate information. Regulated firms must verify the information independently using source documents, and the FCA guidance on customer due diligence makes clear that reliance on a single source is insufficient.

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