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Updated: May 8, 2024   |  

The Cost of Non-Compliance: KYB's Role in Avoiding Financial Penalties

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The total projected cost of financial crime compliance in Canada and the U.S. for 2021 is $49.9 billion, which is a 19% increase from 2020. This is a big financial hit on businesses, and if it persists, it can cause litigation and bankruptcy for the businesses involved.

The effect of non-compliance doesn’t just stop at financial penalties but also leads to legal consequences from the government, regulatory bodies, or affected parties such as customers, employees, and competitors. Legal procedures can consume a lot of time and money, and, in severe cases, lead to settlement or court order injunctions that further strain the company’s resources.

The effect of noncompliance can also lead to a damaged reputation and disruption of business, as customers and partners lose their confidence in the business and tend to withdraw their financial support for the brand. Business activity will start to sag as lawsuits and financial threats hit businesses, which will affect efficiency, income, and finances in the long run. 

Eventually, shareholders will begin to doubt the business as lawsuits persist due to non-compliance; they will become furious if they do not get a return on investment on the court cases and lawsuit penalties. As the business value declines, investors will withdraw from the business in droves.

Events like this have made it so obvious that compliance and regulatory measures are not to be overlooked because the price of non-compliance and lawsuits can lead to the crash of business if proper measures are not taken.

Understanding KYB

Person conducting a compliance or sanctions screening for KYB

‎One of the measures that can prevent this kind of situation is KYB (Know Your Business). Knowing your business plays an important role in minimising the risk of financial penalties for businesses. To better understand how your business plays its role, we need to understand KYB itself.

Know Your Business is a process in which a business's legality is verified, and this process involves checking the existence of the company/business. It’s registration details, regulatory compliance, financial records, and other necessary details for establishing a business relationship.

This process is more efficient and scalable when automated. Automated Know Your Business is a revolutionary business verification process in which business legitimacy is tested and verified by connecting to more than 180 global business registries from over 120 countries, as well as worldwide credit and financial reports for over 160 countries. This provides real-time data to verify business registration details, regulatory compliance, financial records, and other necessary details for establishing a legal business without compromise.

Impact of KYB in subduing financial penalties and litigation

Person conducting a compliance screening

‎KYB is handy in helping businesses fight non-compliance risk and protect their finances from penalties of lawsuits for non-compliance.

KYB can extract and validate information from public datasets, company registries, and other trusted APIs (Application Programming Interfaces). These streamline the data collection and ensure accuracy in entry errors. 

Optical Character Recognition (OCR) technology is used to extract relevant information from scanned documents and verify the authenticity of documents through watermarked detection, hologram recognition, and other advanced techniques. This accelerates the ID verification process and reduces the risk of fraudulent submissions.

Through KYB, organizations can access global sanctions lists and utilise advanced algorithms to screen corporate entities in real time. Matches against the sanctions list trigger alerts for further review, enabling businesses to swiftly migrate potential compliance risk.

KYB also provides regular and continuous monitoring of corporate entities by integrating with data sources that provide real-time updates on changes in ownership, legal status, financial performances, regulatory actions, and adverse media coverage. KYBs alert businesses to significant changes or red flags, enabling timely intervention and risk mitigation measures.

Benefits of automating KYB

The automation of KYB employs machine learning / artificial intelligence to analyse various data points, including financial indicators, market trends, news articles, and social media sentiments to generate risk scores for corporate entities. This data-driven approach enhances risk assessment accuracy and consistency, enabling businesses to make informed decisions efficiently and present errors in bad financial decisions.

Automating KYBs also makes the process free from human errors, enhances compliance, and streamlines workflow by using technologies like Optical Character Recognition (OCR), an up-to-date database with regulatory watchlists, and an automated workflow that fosters quick decision-making.

KYB impact on maintaining financial success

Person moving stacks of coins with a flag and stock market background

‎KYBs not only help avoid financial penalties, but also help prevent loss of trust from partners, stakeholders, investors, customers, and employees. Non-compliance signals a lack of commitment to ethical business practices and regulatory compliance. KYB helps erode doubts and affirm confidence in the company's integrity and reliability, which will prevent the loss of trust in people who matter.

KYBs also help erode negative publicity that comes with non-compliance lawsuits, news of regulatory violations, sanctions that can spread through traditional news outlets or social media platforms, and online forums that can damage the brand identity and business reputation.

KYBs can also make a huge impact on customer relationships, as customers may lose confidence in the brand due to the failure of businesses to comply with KYB obligations, particularly when they perceive their data is not protected or their financial information is at risk. These negative perceptions of the company’s trustworthiness or commitment to data protection may prompt customers' confidence and instill a good business-to-customer relationship.

KYBs help in regulatory scrutiny and persist in severe instances of non-compliance that can damage the company’s reputation as a reliable compliant business partner. They can also ease investor concerns, because the business’s public reputation is being actively monitored and managed.

Regulatory investigations, fines, or enforcement actions may be publicized, further exacerbating reputational damage and reinforcing negative perceptions of the company’s compliance culture. In such cases, investors’ confidence may wane, leading to a decrease in stock price, shareholder activism, or divestment action that further undermines the company’s reputation and financial performance.

KYBs can help prevent the loss of competitive advantages, such as a tarnished reputation due to non-compliance can diminish the company’s competitive advantage in the market. Competitors may capitalise on the company’s compliance failures to gain market share, attract customers, or poach talent, further eroding the company’s reputation for profit-making.


To mitigate the risks associated with non-compliance, businesses can leverage KYB solutions. KYB processes efficiently verify business legitimacy by extracting and validating information from public datasets, regulatory compliance databases, and financial records.

Utilizing technologies such as Optical Character Recognition (OCR) and advanced algorithms, KYB streamlines ID verification, sanctions screening, and risk assessment, reducing the risk of fraudulent activity and enhancing compliance. Moreover, KYB provides continuous monitoring of corporate entities, alerting businesses to potential red flags and enabling timely intervention.


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