What is KYB?
KYB, or Know Your Business, is the process of verifying the identity, ownership structure, and legal status of business partners, suppliers, and clients — both before and during a business relationship.
KYB developed as part of the broader KYC (Know Your Customer) framework. KYC covers customer due diligence in general, applying to both individuals and legal entities. KYB is more specific: it focuses on legal entities in particular. The core question is not only who the individual is, but what the company actually is, who owns it, and who acts on its behalf.
KYB emerged in response to a clear regulatory gap. For decades, individual identities faced strict scrutiny, while companies operated under much weaker requirements. As a result, legal entities became a vehicle for concealing money laundering, terrorist financing, and other financial crime. In Europe, regulators addressed this gap through the Fourth Anti-Money Laundering Directive (AMLD4) in 2017. In the United States, FinCEN introduced KYB rules through the Customer Due Diligence requirements in 2016.
What the KYB process involves
KYB is not a one-time check before signing a contract. Instead, it is a structured process with several distinct components.
The first step is verifying the company’s identity. This means confirming that the business partner is a registered legal entity, and that its official name, address, and registration number match authoritative business registries.
The second component is identifying Ultimate Beneficial Owners (UBOs) — the individuals who actually own or control the company. Ownership often runs through multiple layers of legal entities. Consequently, this is one of the more complex parts of the process.
The third component is risk assessment. This means checking the business partner against sanctions lists, politically exposed persons (PEP) databases, and adverse media sources.
The fourth component — and often the most overlooked — is ongoing monitoring. Companies change over time. Ownership structures shift, addresses change, and legal status can be altered. Therefore, a partner that passed verification a year ago may be in a different situation today.
The core practical challenge: fragmented data
The biggest obstacle in KYB is not the willingness to verify partners. Rather, it is the fragmentation of data across the global business environment.
Every country maintains its own business registry, its own data format, its own language, and its own validation rules. Furthermore, the same company name may appear differently depending on which source you use. Different jurisdictions also apply different thresholds: one may define a beneficial owner as a person holding more than 25% of a company, while another uses a 10% threshold.
Systems that identify business partners automatically need a single, globally recognised identifier. Without one, errors, duplicates, and data gaps are unavoidable.
How the LEI code supports the KYB process
The LEI code is a 20-character alphanumeric identifier that uniquely identifies any legal entity. It connects to verified reference data, including the entity’s official name, registered address, and ownership structure. The Global Legal Entity Identifier Foundation (GLEIF) maintains this data globally, ensuring it stays public, machine-readable, and standardised.
GLEIF describes the LEI system as a tool that supports smarter, less costly, and more reliable decisions about who to do business with. It also improves data quality in client onboarding, KYC/KYB workflows, and cross-border supply chain management.
In KYB specifically, a valid LEI means a company connects to verified identity data. Systems can query this data automatically from the GLEIF Global LEI Index, removing the need for slow and error-prone manual checks.
Moreover, LEI Level 2 data includes ownership structure information covering direct and ultimate parent entities. This directly supports UBO identification. The same need for structured identity data in cross-border transactions also underlies the FATF Travel Rule, which we cover in a separate article.
Ongoing monitoring and LEI validity
The LEI system includes an annual renewal requirement, and this makes it particularly useful for continuous KYB monitoring. Under GLEIF rules, an LEI must be renewed and the entity data confirmed every year. Therefore, a valid LEI signals that the data is current. An expired LEI, on the other hand, signals that the record has not been updated — which is itself a risk indicator in any KYB process.
This makes LEI status easy to integrate into ongoing monitoring workflows.
KYB, LEI, and artificial intelligence
Modern KYB solutions increasingly use AI-driven automation. AI tools can handle registry checks, UBO identification, and sanctions screening at scale. However, their effectiveness depends directly on the quality of input data.
A text-based company name is not a reliable identifier for a machine. An LEI code is. When a system uses an LEI to identify a business partner, it retrieves all associated data from the GLEIF database automatically, without manual intervention. We explore this connection further in our article on why artificial intelligence needs reliable business identity.
As a result, companies with a valid LEI are more clearly identifiable and more easily integrated into automated KYB systems.
Who needs KYB
KYB is a regulatory requirement for financial institutions, payment service providers, and other regulated entities. Frameworks such as MiFID II, EMIR, and DORA all require verified identity data for counterparties.
Beyond regulated sectors, however, KYB is becoming standard practice more broadly. Companies that manage large supplier networks, operate in cross-border trade, or use platforms connecting business entities increasingly apply KYB as part of their standard risk management.
A practical step
If your organisation is involved in cross-border transactions, supplier management, financial markets, or any regulated sector, it makes sense to keep your LEI code valid and up to date.
A valid LEI makes your company more clearly identifiable in KYB processes. It also reduces friction during partner onboarding and supports integration with systems that rely on LEI-based identification.
You can register an LEI or renew your existing LEI in just a few minutes.