KYC and KYB follow some similar processes, but they solve different problems. KYC focuses on people, while KYB focuses on companies. Both KYC and KYB are core parts of fraud prevention, and each plays a significant role in meeting Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) requirements.
This guide breaks down how each process works and why the distinction matters. It also explores how companies can leverage open-source intelligence (OSINT) software like ShadowDragon Horizon™ to uncover risks that static documents and filings miss.
Know Your Customer (KYC): Verifying the Individual
Know Your Customer (KYC) is the verification process a company uses to confirm that a customer is who they claim to be. Businesses rely on KYC to prevent fraud and detect possible identity abuse. It also helps them meet AML and CFT regulations.
Various types of businesses use KYC every day, including:
- Banks
- Fintech apps
- Crypto exchanges
- Online lenders
- Gig platforms
- Marketplaces
Any service that handles money or incurs financial risk depends on KYC to prevent fraud.
KYC Workflow: How It Works
The KYC process begins with basic identity verification. Many teams use automated KYC verification tools that can be integrated with other systems to support seamless data sharing. The customer submits an ID, such as a passport or driver’s license. The goal is to match the document to a real person, which forms the foundation of customer due diligence (CDD).
The next step is biometric checks. For instance, a quick face scan can confirm that the individual is present. These are known as liveness checks, which help to detect identity spoofing.
Next, compliance teams compare the customer’s identity against sanctions and PEP (Politically Exposed Persons) watchlists. A PEP is an individual who holds a public-facing position, such as a government official or a high-ranking judge. These individuals may have a higher risk of corruption, such as bribery, due to their perceived power and influence. This risk also extends to their family members and close business associates.
After watchlist screening, compliance teams conduct fraud checks. This involves analyzing behavior patterns to help surface suspicious activity.
The case then moves to the decision phase, where it can be approved or escalated to enhanced due diligence (EDD).
How OSINT Supports KYC
KYC relies on static documents and registries. This data is useful, but it shows only what the individual claims on paper, which limits how quickly teams can identify issues that require KYC remediation. OSINT tools, such as ShadowDragon Horizon™, add valuable context that standard KYC checks miss.
OSINT tools help teams see behavior and relationships that don’t appear in documents or filings. This enables teams to detect fraud and hidden risk that may otherwise slip through the cracks.
Here’s how ShadowDragon strengthens KYC:
- Confirming identity and background. ShadowDragon Horizon™ maps a person’s online activity, identifying aliases and hidden relationships. Compliance teams can compare this information to the documentation provided during the onboarding process. Mismatches may indicate synthetic or fabricated identities.
- Adverse media and reputation signals. ShadowDragon Horizon™ gathers public reporting on an individual, such as news coverage. It also surfaces litigation history and breach exposure. These signals help to identify early signs of misconduct.
- Detecting fraud actors and multi-persona behavior. Horizon™ Identity helps link usernames and accounts to an individual. It ties emails and other identifiers to shared behavior, which helps to identify multi-persona patterns that may be tied to fraudulent activity.
- Geolocation and network context. Public metadata can help to confirm an individual’s location. OSINT can also reveal patterns linked to potential money mule behavior or identity misuse.
Know Your Business (KYB): Verifying the Corporate Entity
Know Your Business (KYB) is a process for verifying a business and its Ultimate Beneficial Owners (UBOs). The goal is to determine who is ultimately in control of the company and how it operates. KYB helps uncover shell companies and complex business structures that can obfuscate financial crime.
Different types of businesses rely on the KYB process, such as:
- Banks
- Payment processors
- SaaS platforms
- B2B marketplaces and suppliers
Any company that deals with corporate accounts or higher-risk transactions should implement KYB.
KYB Workflow: How It Works
The KYB process begins with verifying that the business is registered. Then, compliance teams review the incorporation details to determine when the business was formed and who submitted the filing.
Next, compliance teams map the business’s ownership structure. This is where UBOs are typically identified. Then, the business and all UBOs are screened against sanctions and PEP watchlists. Adverse media checks are often used to add more context to the basic business verification and ownership information.
Teams then verify the business’s licenses and permits to confirm the address and identify signs of operating activity. Because some industries carry more risk exposure than others, the business is assigned a Merchant Category Code (MCC), a four-digit code that describes the type of business a company operates. The MCC helps to determine the level of risk a business presents and how the business should be monitored.
Like KYC, KYB ends with decision-making. The case can be approved or escalated for enhanced due diligence if the KYB process reveals potential concerns.
How OSINT Supports KYB
As with KYC, traditional KYB processes rely on static lists and documents to verify a business and its activities. OSINT can help uncover complex ownership structures and reveal UBOs that teams may overlook when relying on traditional KYB processes alone.
Here’s how ShadowDragon enhances KYB:
- Validating the legitimacy of a business. ShadowDragon Horizon™ surfaces a company’s online activity, such as public records. A lack of documented activity or suspicious activity may point to a front operation.
- Mapping ownership and corporate networks. Horizon™ helps trace links between owners and related entities. These patterns can reveal outside influence that filings don’t show, such as undisclosed UBO ties or informal influence.
- Identifying regulatory and operational red flags. ShadowDragon Horizon™ can reveal information such as civil actions and enforcement issues. It also reveals public complaints and other signals tied to risk.
Documents show what a person or company claims, but ShadowDragon reveals how they act in the real world. Horizon™ provides behavioral and relational insights that static sources fail to capture. It supports higher-quality risk scoring for both individuals and companies and helps detect fraudulent activity earlier. It also provides clearer visibility into UBO networks.
The table below breaks down the key differences between KYC and KYB.
| Category | KYC (Know Your Customer) | KYB (Know Your Business) |
|---|---|---|
| Subject of Verification | Individuals |
– Businesses – Owners – Directors |
| Documentation Required |
– ID documents – Selfies/biometrics – Proof of address |
– Corporate formation documents – Proof of registration – Business licenses – Identification for UBOs – Ownership charts |
| Complexity of Verification | Verifying a single individual |
– Multi-entity – Multi-jurisdictional – Often recursive across corporate hierarchies |
| Risk Assessment Focus |
– Sanctions screening – PEP screening – Adverse media screening |
– Corporate structure risk – UBO/ownership risk – Sanctions screening for owners – Operational legitimacy |
| When It Takes Place |
Onboarding for: – Financial accounts– Crypto wallets and digital wallets – Trading platforms |
Onboarding for: – Merchant accounts– Suppliers – Vendors – B2B clients |
| Ongoing Monitoring |
Monitoring of: – Watchlists– Behavior |
Monitoring of: – Corporate status– Ownership changes – Legal filings – Exposure to high-risk jurisdictions |
Why the Distinction Matters
Individuals and corporate entities have different risk profiles. Regulators expect deeper checks on corporate entities, including clarity on UBOs and visibility into ownership chains. They expect compliance teams to map complex hierarchies that extend beyond borders.
Fraud patterns also differ. Individual fraud may involve document tampering and identity theft. Corporate fraud involves complex networks of front companies and business activity that exists only on paper.
KYB is more complex. It requires analyzing data from multiple jurisdictions and legal filings. It also involves verifying the identities of directors and owners. There are more steps involved in the KYB process because the threat surface is wider.
ShadowDragon for Ongoing Monitoring
ShadowDragon helps teams stay ahead of risk long after onboarding. Horizon™ Monitor continuously monitors public sources as people and businesses change over time, surfacing new events and shifts that may point to fraud or other harmful activities. This ongoing monitoring gives teams steady visibility and fewer blind spots.
Here’s how ShadowDragon continues to support companies after onboarding:
- Continuous adverse media and risk alerts. Horizon™ Monitor tracks new events tied to individuals and companies. It captures sanctions updates and criminal cases. It also flags lawsuits and adverse media mentions as they emerge.
- Detecting changes in a company’s public profile. Horizon™ Monitor alerts compliance teams to updates in public records and leadership changes. It can also reveal shifts in business behavior, such as new partnerships and unexplained financial disclosures.
- Tracking expanding fraud networks. Horizon™ Monitor reveals new accounts tied to known actors, showing fresh links between individuals and entities. This helps compliance teams identify coordinated schemes early.
Enhance Your KYC and KYB Processes with ShadowDragon
KYC and KYB serve different goals. KYC focuses on verifying the identities of people, while KYB focuses on verifying a business’s ownership and activities. Both matter because fraud takes many forms and often hides behind clean documents and basic filings.
ShadowDragon Horizon™ helps close those gaps by providing tools that reveal how people and businesses behave in the real world and the connections between them. ShadowDragon’s OSINT tools also reveal patterns and signals that standard checks miss. Horizon™ Monitor continues to monitor public sources after onboarding, so teams can recognize emerging risks.
ShadowDragon goes beyond forms and registries, providing real context that helps teams make faster, clearer decisions with fewer blind spots. Get in touch with the ShadowDragon team for a demo to explore how the platform can enhance your company’s KYC and KYB processes.
