24 KYB Risk Factors You Should Consider

24 KYB risk factors you should consider

Gauging KYB risk can be tricky. Here are 24 KYB risk factors to incorporate into your KYB process.

Shana Vu

10 min

Key takeaways

Your Know Your Business (KYB) processes should help you gauge the risk of working with another business or entity. It’s important not to gauge KYB risk with only a small number of signals. The more risk factors you can evaluate, the more thorough a picture you can paint about a potential business partner or customer.

KYB risk factors

It’s important to note that the presence of one or more of these risk factors does not necessarily indicate that you shouldn’t be working with a given company. It simply means that a degree of risk exists, which you might consider as you decide whether or not you want to be doing business with the entity.

General risk signals

These risk signals are the ones that most businesses will want to check as a general best practice.

  1. TIN number
    What it means: In the United States, businesses must have a valid Taxpayer Identification Number (TIN). The existence of a valid TIN indicates that the business or individual has registered with the IRS.

  2. Corporate registration status
    What it means: A legitimate business should be actively registered with the Secretary of State in at least one state.

  3. Business registration number
    What it means: Companies are typically assigned a business registration number when they register with a country’s business registry.

  4. Sanctions list
    What it means: Regulatory bodies maintain sanctions lists detailing individuals and businesses involved in illegal activity.

  5. Adverse media
    What it means: Negative news coverage about a business or individual tied to crime or scandal.

  6. Business documents like articles of incorporation
    What it means: Official documents submitted during business registration, confirming legitimacy.

  7. VAT number
    What it means: Businesses operating in the EU are assigned a VAT number.

  8. Business address type
    What it means: Expecting a well-established business to operate out of a commercial address.

  9. Business entity type
    What it means: Understanding the legal entity of the business, such as LLC, partnership, etc.

Beneficial owners risk signals

  1. KYC verification
    What it means: A business's ultimate beneficial owners must be identified and verified.

  2. Employment verification
    What it means: Confirming individuals are associated with the business in question.

Financial history risk signals

  1. Appearance in third-party financial data
    What it means: Confirmation that a business has engaged in transactions.

  2. Business liens
    What it means: Legal claims to a company’s assets due to unpaid debts.

  3. Business credit report
    What it means: Information revealing a business's creditworthiness.

  4. Presence on a public stock exchange
    What it means: Legitimate businesses typically submit extensive documentation to be listed.

  5. Better Business Bureau (BBB) rating
    What it means: Ratings based on customer complaints and public data about a business.

  6. CFPB complaints
    What it means: Checking for consumer reports against the business can indicate reputational risks.

  7. 501(c)(3) status
    What it means: Indicates tax-exempt and reputable status for nonprofit organizations.

Online presence risk signals

  1. Email risk
    What it means: Business emails linked to their domain indicate a more established business.

  2. Social media profile
    What it means: A certain level of online activity is expected from businesses.

  3. Business website verification
    What it means: A legitimate website often provides key context about a business's risk.

Other risk signals

  1. Suspicious links to other businesses
    What it means: Shared attributes with known suspects can indicate potential fraud.

  2. Industry classification
    What it means: Some industries may present higher risks based on regulatory scrutiny.

  3. General firmographic information
    What it means: Only engaging with businesses that meet certain criteria, such as employee headcount or revenue.

Persona powers KYB evaluation and risk assessment

As you can see, getting a clear sense of KYB risk requires you to consider a number of different factors. A better option is to work with a KYB platform capable of performing as many of these checks as possible — a platform like Persona.