Improving KYB checks to prevent modern fraud attacks and scams

Between $800 billion and $2 trillion in money is laundered globally each year, with an an estimated 80% of it funneled through businesses as a front. This is why it is critically important for banks, fintechs and financial services to conduct thorough Know Your Business (KYB) checksverifications.

Yet for many financial institutions, manual KYB processes create a bottleneck—delaying legitimate businesses, missing hidden risks, and contributing to compliance teams’ growing burnout. Nearly 59% of compliance professionals report feeling burnt out, overwhelmed, reflecting the scale of the challenge.

Our mission at Sardine is to lighten this load. Let’s dive into business verifications, and how leveraging different data sources and AI tools can make onboarding checks much more effective, saving financial institutions time, money and manpower.

Quick primer on KYB Checks and Where It’s Heading

KYB requirements have ramped up significantly over the decades, reflecting a steady trend: as financial systems have gone digital, the burden of verification has shifted squarely onto businesses. Regulators now demand more data, more transparency, and more proactive oversight from the institutions tasked with identifying and managing business risk.

It started as a response to systemic threats: the Bank Secrecy Act in the 1970s, the Patriot Act after 9/11, and the post-2008 global AML reforms. But the pattern is clear: every regulatory wave brings tighter controls and higher accountability. 

Today, with initiatives like the Corporate Transparency Act in the U.S. and the EU’s AML Directives, businesses face stricter obligations to verify Ultimate Beneficial Ownership (UBO), monitor high-risk activity, and report inconsistencies—often with minimal room for error.

Now the industry is shifting toward higher accuracy, continuous monitoring, and timely reporting as the new standard for KYB. This evolution requires:

1. Alternative data sources to enable more precise verifications.
2. A shift from static, moment-in-time KYB checks to continuous risk monitoring
3. AI-assisted screening to efficiently review and prioritize alerts at scale

The KYB Process: What Does It Involve?

In the KYB verification process (under the Corporate Transparency Act 2024), regulated firms need to establish:

Business legitimacy

• Legal business entity name and any trading name
• Ownership structure and persons with significant control (PSCs)
• Legal address of its principal place of business or operational address
• Country of registration and jurisdictions where the business operates
• Date of incorporation and current business registration status
• IRS Taxpayer Identification Number (TIN) or equivalent (EIN, VAT)
• Underlying business entities, including parent companies, subsidiaries, and affiliates
• Underlying legal entities, such as holding companies or offshore structures
• Industry classification codes (MCC, NAICS, or SIC) to verify true business activity

Beneficial ownership

• Full legal name
• Date of birth
• Proof of residential address, such as a bank statement or utility bill
• Identification documents, including a passport, national ID, or driver’s license
• Ownership percentage and level of control over the business
• Politically Exposed Person (PEP) status and background screening
• Adverse media or sanctions screening for risk signals

Nature of the business:

• Products, services, and revenue sources
• Presence in high-risk or restricted industries (e.g., gambling, crypto, arms trade)
• Countries or regions the business operates in
• Key business partners, including suppliers, vendors, and third-party relationships
• Overview of client types and concentration risks
• Historical revenue trends, transaction volumes, and chargeback analysis

This is not an exhaustive list. But it covers some of the most important information that regulated firms need to collect, track and monitor to meet their KYB due diligence requirements.

Challenges in Collecting and Managing KYB Data

When it comes to verifying business entities and identifying ultimate beneficial owners, there can be some challenges.

• Resource intensive: Staying on top of all the financial documents, news reports, beneficiaries and more can be intensive, on top of the rapid pace of new regulations.
• Human errors: Criminals are experts in bypassing rules by playing into pre-existing bias and human errors. 
• Regulatory fines: Mistakes and human errors can lead to enormous regulatory fines stretching into billions of dollars.
• Evolving risks: Business risk levels can shift rapidly due to changes in ownership, transaction volumes, or exposure to high-risk regions, requiring continuous monitoring.
• AI Falsified Documents: Criminals are creating high-quality forged documentation that can bypass basic KYB systems. 

How Sardine Enhances KYB Processes

Sardine performs all the traditional KYB checks with high-fidelity data sources, ensuring accuracy and compliance.

But we go further. We enhance KYB process automationes with custom-built technology built for modern risks, giving AML officers deeper insights and faster decisions: 

• AI-driven due diligence to quickly screen merchants at scale.
• True industry verification to detect miscategorized merchants.
• Web presence monitoring for legitimacy signals and customer sentiment.
• Risky industry analysis to identify merchants with risky or prohibited businesses.
• Product tag analysis to confirm what merchants are actually selling
• Proprietary card spend data to verify card volume claims during onboarding.
• Revenue and chargeback analysis to surface a merchant’s historical risk profile.
• Graph-based insights to expose attacks like multiple applications from the same user.
• 1000s of pre-built rules for logical reasoning, which slashes false positives
• No-code workflow builder to automate merchant onboarding steps

To underscore the value of this, consider a common scenario: a fraudster submits what appears to be a legitimate business registration document and passes initial verification. However, an enhanced KYB process uncovers what basic checks miss:

1. Subtle signs of document manipulation.
2. The use of an emulator during the verification session.
3. A pre-recorded or AI-generated selfie video fed through the user’s webcam stream.
4. A selfie liveness check triggered, but the device was face down.
5. A residential proxy masking the fraudster’s true location.

These signals, layered on top of traditional KYB checks, expose a clear pattern of fraud that may have otherwise gone unnoticed.

With Sardine, you’re not just verifying documents, you’re implementing a smarter, more resilient KYB process that reduces false positives, uncovers hidden risks early, and keeps you ahead of evolving fraud tactics. 

Sardine also continuously monitors merchants (and their beneficial owners), so you can track how their risk profile evolves over time and catch early signs of potential scams.

The Future of KYB in a Digital Age

Criminals are evolving faster than ever, leveraging advanced tools to bypass traditional KYB processes. Nearly half of all scams (42.5%) are now AI-driven, and the use of deepfakes has surged by over 2,137% in just three years.

For enterprise risk leaders, this is no longer a theoretical threat. Without advanced digital tools, businesses face growing exposure to financial crime, regulatory fines, and reputational damage. Compliance missteps are increasingly costly, with multi-million dollar penalties becoming the norm and operational shutdowns a stark reality for those who fall behind.

Inevitably, the future of KYB lies in the blend of both artificial and human intelligence. If you're ready to take that journey, Sardine.ai is just a few clicks away.

Frequently Asked Questions (FAQs)

What is the difference between KYC and KYB?

Know Your Business (KYB) is an extension of the Know Your Customer (KYC) due diligence requirements. It prevents criminals from hiding their identity behind a business structure. In both cases, firms must ensure that the client is not going to use their service for criminal activity.

What is KYB short for?

KYB stands for Know Your Business. It's the responsibility of firms to fully understand what kind of businesses they are working with, or providing services for. If a business turns out to be involved in illegal activities like money laundering or fraud, the firm could also be held responsible and charged by regulators.

What is a KYB check?

A KYB check is part of the due diligence process when onboarding and monitoring business relationships. KYB compliance is a mandatory for financial services.

What are the requirements for Know Your Business (KYB)?

According to the latest Know Your Business FinCEN rules, financial services must complete these KYB verification checks:

The company:

• Business registration
• Full legal name and any trading names
• Current address
• Taxpayer Identification Number

For each beneficial owner:

• Full legal name
• Date of birth
• Current residential address, with no P.O. boxes
• Unique identifying numbers and documents, like a passport
• What does KYB mean in banking?
  KYB (Know Your Business) is an identity verification regulatory requirement for corporate clients. It's designed to prevent businesses from money laundering, terrorist financing or committing other illegal financial activities.
• What is enhanced due diligence (EDD)?
  Enhanced due diligence is a much more rigorous process, usually for high-risk clients. In a KYB context, this could be a company based in a black-listed or grey-listed location, or if the beneficial owner is a politically exposed person.
  Some additional information firms may need includes, for example, if there are any shell companies or other business entities in the ultimate beneficial owners' name. Or if the client or their spouse has had any history of financial crimes.
• What is a KYB document?
  Regulated firms will need to process several different documents during their KYB checks. Some of the main examples include;some text
  • Business incorporation certificate
  • Audited financial documents
  • Identification documents of the beneficial owners
  • A proof of address from the beneficial owner
• Financial institutions will also need to present regulators with evidence of their KYB process, KYB verification, and ongoing monitoring, often in the form of reports.
• Why is it important to prevent financial crime?

Preventing criminals from accessing illicit funds is a vital deterrent and could save lives.

Without access to money, there can be less extreme human rights violations, like human and child trafficking, forced drug smuggling, terrorist dealings, or scams.

It is also vital to reduce white-collar crimes, like corrupt business owners hiding their assets for tax evasion or politically exposed persons (PEPs) pocketing bribes in exchange for public contracts.

What is the best fraud detection software?
The best fraud detection software depends on a business's unique needs. This is why firms should carefully consider who to partner with and how the service can be tailored to them.

‍
In the world of cybercrime, it's a good idea to opt for agile firms that can quickly pre-empt and react to threats. At Sardine, we are always thinking one step ahead of fraudsters, and our technology can detect unusual behavior signals even before the first checks. 

‍