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What is the Know Your Business Check (KYB)?
Entities which deal with money transfer are required to perform a Know Your Business (KYB) check. This check includes verification of the company registration, business license updates, and the direct and indirect owner of the company with whom you are conducting business. Non-compliance to the KYB check may lead to the risks of exposure to money laundering and terror financing activities. If due diligence of KYB is not performed, it may at any point potentially damage the brand integrity and profit baseline with penalties for non-compliance.
Why do You Need to Perform A Due Diligence Check on A Business?
Do you know who you are doing business with? Sure, you might be able to google the name of the company and the person you are interacting with to check the legitimacy of the company. But do you truly know who operates the business, where the money really goes and who pulls the strings behind the scenes?
Conducting due diligence check allows you to truly understand who the owner of the corporation might be and who the final beneficiary is for the transaction that is being conducted.
Beside legal obligations, there are social and ethical responsibilities to know the ultimate beneficial owner (UBO) of companies you conduct business with.
Why is it important to conduct a company check?
Conducting a company search is easy to do and can help provide valuable insight into the company you may be looking to conduct business with. A company check provides information such as the company ABN and ACN, date of company registration, as well as the status of the company registration. A simple company check can help gauge the reputation of the company and can help prevent disruptions and embarrassment to your business in the future.
What is the 6th Anti-Money Laundering Directive (6AMLD)?
To be implemented by 3 December 2020, the Sixth Anti-Money Laundering Directive (AMLD6), was published on 12 November 2018, only four months after the 5AMLD came into force. It is intended to extend and reinforce the previous AMLDs by:
Providing a comprehensive definition of money laundering and predicate money laundering offences.
Establishing common rules for identifying ML activities across the EU, and requiring staff to be trained on how to recognise them.
Including aiding, and attempting to commit, money laundering as an offence.
Extending criminal liability for money laundering to legal persons and persons in certain positions of authority.
Increasing minimum sentences, and allowing additional penalties/sanctions, for money laundering offences.
Introducing aggravating circumstances, such as connections to a criminal organisation or offences related to the exercise of certain professional activities, to aid identification of accomplices of the money laundering process.
What is the 5th Anti-Money Laundering Directive (5AMLD)?
On April 19, 2018, the European Parliament adopted the 5th Anti-Money Laundering Directive (5AMLD). This is an update to the European Union’s anti-money laundering (AML) legal framework. The 5AMLD came into effect on July 9, 2018, in an effort to bring increased transparency to financial transactions, pushing back against money laundering and terrorist financing across Europe.
One of the key amendments that was integrated into 5AMLD was the inclusion of crypto service providers such as Binance exchange or custodian wallet providers.
According to the 5AMLD, the law will:
- Increase transparency on who the ultimate beneficial owner of the company is
- Easy access of information for European financial regulators through centralised data
- Tackle terrorism financing through better surveillance and legislation on cryptocurrency
The consequences of not complying with the regulations are punitive fines, criminal proceedings, damaged reputation and possibly becoming a sanctioned party.