Know your business (KYB)

Know your business (KYB) is the industry label for customer due diligence applied to legal-person customers: identifying and verifying the entity, understanding its ownership and control structure, establishing the nature of its business, and identifying natural-person ultimate beneficial owners. FATF and EBA texts use CDD language for any natural or legal person customer; KYB is desk terminology for the corporate and institutional slice of that work, parallel to KYC as the broader label.

How know your business work is used on EF, PF and CRE desks

Bank desks onboarding SPVs, sponsors, guarantors, funds and operating companies run KYB to establish who the legal customer is, where it is incorporated, what it does, and who ultimately owns or controls it. That file then supports credit narrative, sanctions screening of entities and controllers, and escalation where ownership is opaque. Corporate identifiers such as the LEI help map legal entities; they do not replace natural-person beneficial-owner identification.

The EBA ML/TF Risk Factors Guidelines apply to business relationships and occasional transactions with any natural or legal person. When identifying customer risk, firms consider the customer's and beneficial owner's business or professional activity, reputation, and nature and behaviour. For legal persons, trusts and other arrangements, firms ask what the purpose of establishment is and what the nature of the business is. Ownership and control structures that are complex or opaque without an obvious commercial or lawful rationale are treated as risk-relevant.

Mechanics: CDD for legal persons under FATF and EBA

FATF Recommendation 10 requires identification of the customer and verification of identity; identification of the beneficial owner with reasonable verification measures; understanding of ownership and control of legal persons and arrangements; understanding of the purpose and intended nature of the relationship; and ongoing monitoring. CDD is required when establishing business relations, for occasional transactions above USD/EUR 15,000 (and specified value-transfer cases), on suspicion of money laundering or terrorist financing, or when prior identification data is doubtful.

EBA initial CDD, aligned with Directive (EU) 2015/849, requires firms before entering a relationship or carrying out an occasional transaction to:

• identify the customer and, where applicable, the beneficial owner
• verify identity on reliable, independent sources so the firm knows who the beneficial owner is
• establish the purpose and intended nature of the business relationship

Measures are risk-sensitive. Simplified CDD may be available for low risk where national law permits. Enhanced CDD is required for increased risk, including beneficial-owner and high-risk third-country guidance strengthened in the EBA's revised guidelines. FATF Recommendation 24 separately requires countries to prevent misuse of legal persons and to ensure adequate, accurate and up-to-date beneficial ownership information is available to competent authorities.

Boundaries with KYC and credit underwriting

KYB is not a separate legal standard from CDD; it is CDD focused on businesses. It is not credit underwriting of repayment capacity, though ownership and business-purpose findings feed the credit file. It is not limited to company-registry extracts: registries and LEI records are sources within a risk-based verification process that must still reach natural persons who ultimately own or control the customer. Shell or asset-holding vehicles, nominee arrangements and multi-jurisdictional stacks increase the intensity of KYB without changing the underlying CDD duties.