Business bonds are essential for growth, but they are always vulnerable to financial risks. The partner company may be involved in money laundering, terrorist financing, corruption and other suspicious activities. Onboarding the high-risk profile may cause sanctions and penalties. These legal consequences directly hit the financial status of the company and its reputation. For this reason, rigorous business verification is required while onboarding the companies. AI offers many benefits in the process of checking the companies’ legal status as well as assessing the potential risks, including more detailed work on their verification. In this read, let us delve deeper on the entire procedure of artificial intelligence business validation, and its role in safe onboarding.

Know Your Business Verification

Business verification involves thoroughly examining a company to evaluate its legal standing and confirm the associated individuals. The financial performance of the business and the people behind it is evaluated to ensure financial transparency. The industry-specific business information is collected to verify the business identity, type, nature, and intended purpose. In terms of the verification of the business identity, type, nature, and its purpose AI algorithms can gather and analyze business information in the particular industry to confirm with better efficiency. The businesses need to ascertain the level of risk on the partner company by conducting an anti-money laundering (AML) check. Automated system using AI capabilities can improve AML checks carried out on the company and its beneficial owners better in comparison to identifying various signs of suspicious activities.

Know Your Business Solutions

The complete process of business verification comprises data collecting, documentation, ultimate beneficial owner verification, conducting AML checks, and enhanced due diligence. Let's explore the Know Your Business process here.

Data Collection

The first and foremost step of business verification is to collect the company information. It includes the name, legal type, address, registration number, registration date, tax ID and other relevant data. In each country or state, there is usually a parent registry which maintains the record of registered business in that region. After the counterparty has submitted the data to the business, this data can be automatically checked against public database by AI in quicker time. To increase the speed and accuracy of data validation, AI systems can employ government public registries, legal bodies and other relevant authorities.

Document Collection and Screening 

The business documents are necessary to collect for the verification of legal status and financial performance. The articles of incorporation, tax records, bank statements, income statements, and other relevant documents are collected. AI can easily automate the process of checking the validity of the document and distinguishing such signs more effectively than simple methods.

UBO Verification

In Know Your Business, the verification of the business people is as important as the business. The data and documents of the UBOs are collected to analyze their legitimacy and financial performance. The name, address, contact number, copy of passport ID and driving license are collected. AI can screen all the gathered information against the public database existing in the region more efficiently. Most of the countries’ parent registries do not keep ultimate beneficial owner registers; however, AI can assist in tracking and analyzing UBO data such as their titles, number of shares, and business capital using various databases. However, the parent registry, which has UBO information, keeps the data of all UBOs' designations, the number of shares, and the capital in the business. 

AML Checks 

The business must conduct AML checks on the business and all the UBOs in the shareholding chain. If any shareholder in the business is involved in money laundering, it is a potential risk for partner companies. AML checks are necessary to investigate whether the business and UBOs comply with regulations. The background checks are applied to filter out the sanctioned companies and shareholders. If the business onboard the sanctioned entity, it may cause legal consequences.

Enhanced Due Diligence

The enhanced due diligence involves the constant monitoring of the business to stay vigilant about high-risk profiles. It helps businesses to stay alert about the financial activities of the partner companies. The ways of illicit funding are detected through periodic reviews and reporting. EDD helps to build healthy financial relations for a long term with minimal risks and threats. 

Final Words

Third-party due diligence requires the investigation to determine the legal compliance and financial standing of those involved. A similar approach is used on the data regarding the business and, more so, the business person to filter and check against relevant databases. Business regulations for each company differed in relation to the country of location. The business world must adhere to the strict third-party due diligence policy while onboarding. Business screening helps to validate its credibility and warn against the risks.Business screening with the usage of artificial intelligence assist in confirming the credibility of a business and alerting one of potential risks. Furthermore, AI can also ensure that the business partners have complied with the law and other regulatory measures to normalize different business entities financial performances from time to time. Therefore, AI based business verification is indispensable for ideal financial relations and quality of onboarding.