KYC vs KYB: Key Differences and When to Use Each for Compliance

When a platform onboards customers, it has to verify who is behind the account and what risk that relationship creates. That is where KYC and KYB come in.

KYC vs KYB is a simple question with big operational consequences. Use the wrong process and you either create unnecessary friction or leave gaps in your AML controls.

This guide explains what KYC and KYB mean, how they differ, and how compliance teams can decide which checks to run for crypto exchanges, fintechs, and SaaS platforms.

If you want broader context on how these checks are evolving, see Identity Verification Evolution.

What is KYC (Know Your Customer)?

Know Your Customer (KYC) is the process of verifying an individual’s identity and assessing their risk before (and during) a relationship. It supports customer due diligence requirements and helps detect fraud, sanctions exposure, and money laundering risk.

KYC is not a single document check. It is a workflow that combines identity verification, risk scoring, and monitoring over time.

The baseline expectations are widely grounded in a risk-based approach and customer due diligence requirements under the FATF Recommendations. Many regulators implement these principles locally, with additional detail for specific sectors.

Typical KYC components

Identity data collection usually includes name, date of birth, and address. It also includes verifying an ID document and validating that the person is real.

Screening checks whether the person appears on sanctions lists or is a politically exposed person. It also looks for adverse media signals where appropriate.

Risk assessment combines geography, product risk, transaction expectations, and customer profile. The result determines what depth of checks are required.

Ongoing monitoring looks for behavior that deviates from what was expected at onboarding. Monitoring also supports periodic refresh when data becomes stale.

When to use KYC

Use KYC when the customer is a natural person. That includes a retail user opening an account, trading crypto, or subscribing to a service as an individual.

Use KYC when you need to verify someone acting on behalf of a company. Even if you run KYB on the business, you still need to know who controls it.

What is KYB (Know Your Business)?

Know Your Business (KYB) is the process of verifying a business entity and assessing its legitimacy and risk. It focuses on the company’s registration details, ownership, and control structure.

KYB matters because businesses can be used to disguise beneficial owners or move funds through complex structures. That is why regulators increasingly emphasize beneficial ownership transparency.

In practice, KYB often becomes the gateway to verifying the people behind the entity. The common pattern is KYB for the organization plus KYC for owners and controllers.

Typical KYB components

Entity verification confirms the company exists and is registered. It includes validating identifiers such as registration number, tax ID, and jurisdiction.

Beneficial ownership identification determines who ultimately owns or controls the entity. This is where ultimate beneficial owner (UBO) analysis becomes central.

Control structure mapping identifies directors, officers, and authorized signers. It clarifies who can act on behalf of the business.

Business risk screening reviews sanctions exposure, adverse media, and high-risk industries. It can also include checks on jurisdictions and counterparties.

When to use KYB

Use KYB when your customer is a registered business entity. That includes corporate accounts for payments, treasury, B2B SaaS, and institutional crypto trading.

Use KYB when you onboard merchants, vendors, or partners. It helps avoid onboarding shell entities or sanctioned corporate networks.

KYC vs KYB: Five key differences

1) Subject of verification

KYC verifies a person. KYB verifies a legal entity and the people who stand behind it.

2) Depth and complexity

KYC is usually a single-identity workflow. KYB is multi-layered because it has to cover the entity plus ownership and control structures.

That complexity increases when ownership crosses borders or uses multiple layers. It also increases when corporate registries are incomplete.

3) Documentation and data sources

KYC typically relies on identity documents and proofs of address. It may include biometric liveness checks and device or behavior signals.

KYB relies on corporate registries, incorporation documents, and ownership records. It often requires reconciliations across multiple jurisdictions.

4) Regulatory emphasis on beneficial ownership

KYB is tightly connected to beneficial ownership rules. For example, the U.S. Customer Due Diligence rule requires institutions to identify and verify beneficial owners under defined thresholds and conditions.

For a primary reference, see the FinCEN Customer Due Diligence rule.

5) Operational cost and time-to-onboard

KYC can often be completed in minutes. KYB can take longer because it depends on corporate registry access, documentation quality, and ownership complexity.

For many platforms, the real cost is not just vendor fees. It is analyst time, exception handling, and customer support load.

When should you use KYC vs KYB (or both)?

For compliance teams, the simplest decision framework is to start with the customer type. If the customer is a person, run KYC.

If the customer is a business, run KYB. Then determine which individuals need KYC as part of that KYB workflow.

Use KYC when

The account holder is a natural person. This includes consumer accounts and most retail crypto users.

The person is a beneficial owner, director, or authorized signer for a company account. KYB does not replace verifying these individuals.

Use KYB when

The account holder is a registered entity. This includes corporations, LLCs, partnerships, and certain trusts.

The platform is onboarding merchants, corporate customers, or partners. KYB helps validate legitimacy and ownership.

Use both KYC and KYB when

The customer is a business and you must verify its owners and controllers. This is a standard expectation in regulated contexts.

When risk indicators are present, apply Enhanced Due Diligence (EDD). EDD can apply to both people and entities, depending on the scenario.

Implementation best practices for KYC and KYB

Adopt a risk-based approach

Not every customer requires the same depth of checks. A risk-based approach means you apply stronger verification where the risk is higher.

This reduces unnecessary friction for low-risk users while still meeting compliance goals. It also makes analyst time more scalable.

Design for privacy and data minimization

Collect only what you need for compliance and risk decisions. Minimizing sensitive data reduces breach impact and operational burden.

Many teams are exploring architectures that reduce centralized PII exposure. That includes reusable verification and user-controlled storage patterns.

Build monitoring into the lifecycle

Risk changes over time, especially for corporate structures. Ownership, directors, and sanctions exposure can change after onboarding.

That is why continuous monitoring and triggered refresh matter. It turns KYC and KYB from a point-in-time checkbox into an ongoing control.

Automate exception handling and audit trails

Automation should not only approve low-risk cases. It should also route exceptions to analysts with clear reason codes and evidence.

Good audit trails reduce remediation time and make regulatory exams easier. They also improve internal visibility on false positives and bottlenecks.

Plan for global coverage and edge cases

Crypto, fintech, and SaaS are often global from day one. KYB in particular becomes difficult when registries vary in quality and accessibility.

Document what you do when data is missing and how you handle manual attestations. Consistency matters as much as speed.

Common KYC and KYB challenges

Multi-jurisdiction complexity

Thresholds, registry availability, and documentation standards vary across countries. What works well in one jurisdiction can fail in another.

Operationally, this shows up as longer onboarding times and more exceptions. It also increases the importance of policy alignment.

Ownership opacity

Shell structures and nested ownership layers can hide true control. This is the core reason KYB is harder than KYC.

Strong UBO logic and clear escalation paths are essential. Without them, KYB becomes a box-ticking exercise.

User experience friction

Friction is not only a growth problem. It is also a compliance problem because users will try to bypass processes that feel unreasonable.

Clear communication and reusable verification reduce drop-off. They also reduce support tickets and rework.

Conclusion

KYC verifies individuals and KYB verifies businesses and their ownership structures. Most compliance programs need both, not one or the other.

The goal is to apply the right checks at the right time, using a risk-based approach that scales. That is how you reduce fraud risk without making onboarding painful.

If you want to modernize your KYC and KYB workflows, book a demo to see how Zyphe can support privacy-first verification and ongoing monitoring.

Note: The EU is also strengthening its AML framework through bodies such as the EU AMLA, reinforcing the trend toward stronger, more consistent controls across jurisdictions.