[UPDATED ON DECEMBER 1ST, 2022]

‍Business verification (KYB) has now become a necessity not only for the Anti-Money Laundering obligated, but KYB is an essential part of almost any sector. It involves taking the time to carefully vet all business customers, partners, investors, suppliers, service providers, property owners, drivers - you name it, if it is a legal entity that you want to onboard, you probably should verify them. As with most other sectors, some regular upgrades and innovations are created to change the industry for the better. With that in mind, here is a list of business verification trends for 2022.

Business Verification as a Top Priority

Given that there are strict requirements for Customer Due Diligence (CDD) and adherence to Know Your Customer (KYC), many companies are making changes to ensure that they are in compliance with these updated regulations. Even companies in non-obligated industries are starting to be more aware of how crucial it is to collect important details from their business customers and partners such as:

• Legal name and registration code: The name of the associated business and the registration number, in order to check whether the company is officially registered.
• Business address: The physical location of the company to make sure it is not just a shelf company on paper, but a real company with a physical address.
• Company status: The general operation status of the company, whether it is live or closed.
• Incorporation date: This includes the day, month, and year of the company's incorporation, in order to check the age of the company. A recently opened business is considered a higher risk.
• Managing directors:  This includes details such as essential higher management personnel, and C-level, directors of the company.
• Shareholders, ownership structure, and UBOs: The shareholders of the company that owns a significant percentage, the ownership structure up to the very last physical person that has an impact on the company (the UBO).
• Sanctions: This includes whether the company itself is on any sanctions lists, watchlists, embargo lists, or any of its shareholders, directors, or owners.
• Connected entities: Sometimes referred to as RCA (Relatives Close Associates). The entity itself may be clean in terms of sanctions, however, connected to organizations or people that are considered high risk.

However, for obligated companies, the list is much longer including putting more emphasis on finding the Ultimate Beneficial Owners (UBOs), shareholders, more extensive Sanctions screening, Politically Exposed Persons (PEPs), and Special Interest Persons (SIPs). Either way, businesses must go above and beyond to collect the pertinent details in order to remain in compliance with stricter regulations. In particular, the business verification industry is growing exponentially reaching tens of billions of dollars, which means an increase in the number of products as well as their general accessibility. This also means that businesses will become increasingly aware of the importance of these products and how they serve to help prevent money laundering on all levels.

Increased Automation and Flexibility

Business verification is not a new phenomenon. In the past, the process was handled in a much more manual way. However, that archaic practice was tedious, expensive, and time-consuming. These days, due to the increase of the amount of data, all companies must have automated methods of collecting such details so they can concentrate on what they do best - their core business. Although legal entity verification is important, it cannot come at the cost of the efficiency of the business, where one of the most important metrics is the conversion rate.

Regarding the need for more flexibility, Julia Ront, CEO & Founder at Vespia says: “We see in our experience that flexibility is highly valued at the moment. Flexibility in payment (not just commitment for a year to build you a custom solution, or charging per module), flexibility in the verification process/flow (modular products where you can put the puzzle pieces together in one flow that you need). Also, flexibility when it comes to upcoming regulation changes. The business verification solutions of today need to be flexible, so you wouldn't need to build a new solution every time the regulations change.”

Usability and Fast Decision Making

A few years ago the trend was that you need to have as many sources as possible. The more commercial registers, sanctions lists, Orbis, Dun & Bradstreet, Dow Jones and other types of sources you have - the better. Solutions were integrating with sources and acting as aggregators by just throwing the results at the user and the user had to figure it out and analyze on their own.

These days it is more about the user experience, the user friendly self-service environment, the easy flow builders and AI that will help you make a decision and present you the data in a digestible way. These days it is not just about finding the right source, but it is also the analysis part that is taking a long time.

“This is why we put so much emphasis on how we present the data and helping the user decide whether they want to work with a business or not. Especially since so many non-AML obligated sectors are becoming more aware of the KYB necessity, they don’t have time to figure out how to do AML, they want hints and recommendations as to what to decide,” Ront added.

Web3

Another major trend for business verification in 2022 is business verification on Web3. There is a new identity verification tool called Humanity Check, which is a single sign-on (SSO) option used to protect users’ private data in Web3. This added layer of verification was designed to help identify users, ensuring that they are all unique people as a means of enhancing the users’ experience without forcing them to compromise their unique identifying details in any way. In other words, it allows websites to verify users while also allowing the users to stay in control of their personal data. The digital identity should be established as a norm not only for natural persons but also for legal entities.

According to Anton Vedeshin, Ph. D., Technical Founder at Vespia: "Currently the companies are verified behind the owners' back. For individuals we have GDPR, but company information is not regulated and theoretically, it can be used whenever by whoever. The use of digital identities for companies would allow the business itself to take control over its data.”

Blockchain

This technology is used to make it easier for people to verify various credentials online. It can be used to help verify documents such as academic qualifications, vaccination cards, occupational licenses, employee ID, etc., while also allowing the individual’s details to remain private. Blockchain technology allows businesses to share a ledger that manages the regular verification, meaning there is consensus that the recorded data represents the true history of transactions as updated on a nearly real-time basis. This makes it possible for users to access this information while being confident that it is both factual and up-to-date. However, nowadays it is important to share a bigger range of information to have a better understanding of the legality and transparency of a company as well.

Cryptocurrencies

Another trend is company verification with cryptocurrencies. In the past, the cryptocurrency sector has been highly unregulated. This has made it possible for a wide array of actors to commit fraud on a massive scale. Luckily, the use of business verification tools makes it possible to verify actors and weed out the bad ones. Now that cryptocurrencies are becoming more mainstream, finding the best ways to verify those participating in cryptocurrency buying, selling, and trading is essential.

Currently, the process is very manual and long. A good example of a tedious existing system is the one implemented in Binance with an average onboarding of 2 months for business customers, up to 9 steps to follow, 12+ different document scans to be uploaded, constant communication with customer support, and a high fall-off rate due to the complicated process.

Automated business verification tools not only allow to verify the legitimacy of a company and the people inside it, but also drastically decrease the onboarding time.

NFTs

Although NFTs are a concept that primarily exists online, times are quickly changing. So, while NFTs are used to create, sell, trade, and collect digital items such as art, music, videos, tweets, and other digital assets, they may soon be used to verify assets in real life. Moreover, they may also be able to verify not only people but companies as well.

The verification will be possible without damaging the anonymity of natural persons behind companies and organizations. They will still have control over the data, as well as the tools accessing it, but it will only serve for verification purposes.

Metaverse

Similarly, the metaverse is also making strides in terms of business verification. Given that it is such a new concept, creating such verification tools is essential. Important players in the KYC scene such as Veriff already created a Metaverse-focused identity verification solution. This suite of tools was created as an answer to the fact that a new digital world is being created online. Since there are still so many unknowns, this makes it possible for hackers and other bad actors to take advantage of individuals and, consequently, entities of all kinds.

Luckily, the new verification tools help with the following:

• Safe global scaling
• Age-gating protection
• Multi-account prevention

Sharing Economy Companies

Lastly, one major trend is that of staff (couriers, drivers, property owners and partners) verification of sharing economy companies such as Bolt, Wolt, and Uber. Given that the gig economy has become so mainstream and virtually anyone is now able to sign up to work for these companies while providing minimal personal details, staff and business verification are essential. Since couriers and drivers are usually in the gray area of the employment law, there has been an increase in solopreneurs as it eases the process to partner up. To reduce fraud and financial crime, it might be convenient for sharing economy companies to establish a KYB procedure.

Bigger need to build trust in 2022

The year 2022 may just be the year to change the world as we know it. Indeed, although concepts such as NFTs, digital currencies, and the metaverse are not new, their popularity has increased immensely over the past couple of years. This is largely because these unchartered territories stand to generate large amounts of wealth in a very limited time. Thus, there is a bigger need to regulate and implement widespread AML compliance efforts to reduce money laundering and other related crimes.

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