Verification Of Company- The Need Of The World To Fight Against Business Frauds

Verification of company is getting widespread popularity in the digital world due to immense threats of money laundering and not being able to comply with updated strict regulatory laws. The launder of funds has summed up to 2% of the world’s GDP according to UNODC. Furthermore, identity thefts and financial crimes are becoming prevalent as the world shifts to the digital market.

According to a PwC report, 47% of small and large-scale businesses have been the victim of fraud in the past 24 months. These stats prove the need for verification of the company.

Verification Of Company – The Corporate KYC

Verification of company in other words is known as Know Your Business (KYB) verification. The meaning of know your business is the investigation and evaluation of any business under Anti Money Laundering (AML) and Counter Finance Terrorism (CFT) rules. It is a detailed verification procedure in which businesses undergo extensive inspection and screening. 

Businesses have been facing immense challenges to combat fake business identities and catch fraudulent actors involved in their channels. Consequently, verification of companies against their registered business documents approved and stamped by the government mitigates the chances of business identity fraud.

Know the business is similar to know your customer verification. The only difference between the two is that KYB is identity verification of a business whereas KYC is identity verification of a customer. Therefore when “verification of company” is performed then effective due diligence is achieved. Due diligence is performing audits and investigating the financial documents before onboarding a business client.

Furthermore, due diligence is a well-maintained procedure for inspecting and reducing hazards associated with a company. It is also performed when an investor is wanting to invest in any share through available public data.

Why Verification Of Company Is Essential?

With KYC verification, fraudulent customers can be caught and potential risks can be minimized within a business. However, it still does not detect and analyze frauds and money launders from partnering businesses.

Some businesses have upheaved tactics to run a black fund business. For example, shell companies and front businesses mix illegal and white funds and present them legally. They achieve this heinous act by manipulating financial records such as over-invoicing and under-invoicing. Additionally, they show that they have achieved higher revenue than they actually have which makes it extremely difficult for regulatory authorities to find the exact amount of laundered money.

Moreover, criminals can also bribe and indulge banks when a high level of money laundering needs to be performed. This is why verification of the company ensures financial sectors have a safe and secure business against fraudulent activities.

Alarming information that can cause frauds

• The office address and the delivery address is not the same
• A user is indulging in transactions with a high-risk user
• Financial records such as audit reports, investment records, or bookkeeping are not balancing or have missing information
• Prompt changes in shareholders or high management authority such as ultimate beneficial owners

How A Company Is Verified Through Know Your Business Verification?

Online KYB checks are performed by extracting information about a business through publicly available data. When verification of company is performed the following points should be kept in mind.

Business Research

• Background checks should be run on ultimate beneficial owners
• The address should be verified along with verifying that all addresses are the same
• Trademarks should be thoroughly checked
• Registered documents must be checked for any photoshop or tampered data
• Bank accounts information must then be collected and examined to check the legitimacy of the business.

Business Filings

A detailed check must be performed on all official documents that are publicly available such as

• Financial statements
• Shareholders list
• Audit reports
• Investment records

Business statements

Information of all higher authorities of a business should be collected and then verified for instance,

• UBOs
• Directing authorities
• Individuals holding 25% of the share or more
• Political affiliations

This is performed so that any individual involved in criminal activities such as counter financing or money laundering can be exposed in the eyes of regulatory authorities. 

Business network

Business partners and the association with other business entities are reviewed to see if they deal with any business that has a history of breaking the law.

Summing It Up

Verification of a company can help in keeping a corporate sector free of any prevalent frauds. These verifications aid in improved compliance with anti-money laundering and CFT. Furthermore, they help companies safeguard their finances from hefty fines and sanctions.