Know your customer (KYC) is a known and essential quantity in risk management and compliance. The concept, refined on the corporate level as Know Your Business (KYB), links entity data directly to relationship quality, trust and profitability.
That is what Kyle Mack, CEO and co-founder of Middesk, is banking on with its KYB “verification infrastructure.”
Mack has written that the cost of getting onboarding wrong is substantial, that workflow and data glitches, mismatches and missing information puts conversions at risk. Middesk addresses data quality and related problems to enable faster onboarding.
As with generalized KYC, KYB involves the application of data and technology to verify client identity, legitimacy and risk profile. It is part of the anti-crime, anti-money laundering and countering-the-financing of terrorism framework designed to protect financial-system integrity in the face of regulatory tightening and increasingly complex threats.
Kyle Mack of Middesk
As Mack explains it, KYC emerged with a focus on individuals’ identities, dating back to the Bank Secrecy Act of 1970 and bolstered by the post-9/11 Patriot Act and subsequent enhancements. It relies on structured consumer datasets including Social Security numbers, birthdates, credit files, and address histories for authentication purposes.
KYB extends those principles to businesses. Financial institutions, fintechs and others rely on KYB to confirm that a business exists, is properly registered, is owned and run by real individuals, and isn’t engaged in illicit activity.
A decade ago, the Panama Papers “highlighted how outdated business identity infrastructure made it easy for shell companies to obscure ownership and move money without scrutiny,” Mack says. “This accelerated the need for KYB as a foundational part of any business-facing onboarding program."
"KYC involves identity verification, customer due diligence (CDD), enhanced due diligence (EDD), and producing a compliance decision aligned with AML standards," says Will Charnley, chief operating officer of AI-driven enterprise intelligence company Liminal.
"KYB,” he continues, “requires performing all of those steps for each ultimate beneficial owner (UBO) while also validating the legitimacy of the business itself, ensuring it is properly formed, federally and state compliant, and suitable to operate on a given platform. In short, KYB involves considerably more steps and variables."
Charnley considers an effective KYB program far more challenging to implement than KYC, because “no centralized source of truth exists. As a result, many organizations rely on highly manual processes such as document uploads and caseworker review.
“Effective KYB requires connectivity into federal and state registries, along with the expertise to design workflows that reduce friction while maintaining compliance. In a recent study we conducted, only 21% of banks and fintechs reported having automated KYB solutions, compared with more than 85% for KYC – illustrating the operational gap practitioners face.”
Mack agrees that KYB is inherently more complex than KYC, as “businesses, especially newly formed ones, often lack a clean, standardized history. Their documents may be outdated, inconsistent, or incomplete. Their ownership structures can be multilayered and opaque. And regulatory expectations have grown substantially: Mapping beneficial owners, validating business registrations, screening sanctions and watchlists, and confirming website and license legitimacy are now table stakes."
Noting that much “legacy data” for business verification was assembled before the advent of digital onboarding, Mack says, “Modern KYB rebuilds this data infrastructure from the ground up, providing real-time, authoritative business information so companies can trust the decisions they’re making,
Will Charnley of Liminal
“In a world where trust is in short supply, KYB is how businesses regain it.”
According to Charnley, business and entity verification (BEV) solutions help organizations meet regulatory requirements, avoid fines, and prevent criminals or sanctioned entities from exploiting financial institutions for money laundering.
He also points out that fraudulent or synthetic businesses pose significant financial risk to the platforms they interact with and to end consumers. BEV mitigates this risk by creating reliable assessments of business legitimacy using deterministic and probabilistic data sources.
Moody’s offers an Entity Verification API accessing “the most extensive company and corporate structure data globally, combined with sanctions and adverse media data to help you create corporate transparency and an insightful picture of risk.”
Whether the lens is KYC or KYB, “Outdated, manual processes – still common across many firms – create bottlenecks, increase error rates, and slow investor verification, placing significant pressure on internal teams and weakening the investor experience,” says Sean Wilke, head of growth strategy and compliance at investor services provider IQ-EQ. “Recent regulatory developments intensify these challenges.”
Sean Wilke of IQ-EQ
Operational and compliance complexity is compounded “as firms move from institutional-only investor bases into retail and semi-retail channels,” Wilke goes on. “While institutional structures are well understood by compliance teams, retail capital introduces multiple intermediaries and intermediary structures, making it significantly harder and more time-consuming to identify and verify the ultimate beneficial owners . . . Third-party assistance is almost a prerequisite for any firm looking to raise assets en masse through retail and semi-retail channels.”
With retail inflows rising, regulators are demanding greater transparency, faster onboarding and stronger controls.
"Geopolitical catalysts and macroeconomic tailwinds are creating a dynamic AML/KYC environment that is constantly evolving," Wilke adds. "Firms need resources that are nimble and are constantly being refreshed to reflect the current state of global affairs."
Citing Middesk client experiences, Mack mentions a top five U.S. bank automatically approving 30% more businesses while reducing KYB spend by 80%. Another bank saw its digital small-business auto-approval rate jump from under 20% to around 65%, with massive drop-offs in requests for documents and manual checks.
Meanwhile, organizations still using legacy KYB data or processes are at a significant disadvantage against fraudsters who are upping their game.
“Fraud is becoming more sophisticated” at a crucial moment, he warns. “The only sustainable response is to modernize the underlying data and workflows.”
Middesk’s KYB infrastructure consists of APIs, dashboards, automation, and AI agents, enabling instant, programmatic access to authoritative business identity data when it is needed. “It’s how risk, compliance, product, and operations teams verify businesses accurately, manage risk proactively, and onboard customers with confidence,” Mack says.
Agentic-AI compliance startup Bretton AI partnered and integrated with Middesk, saying in June 2025: “We first connected with Middesk through shared customers and immediately saw how well our solutions complement each other. By integrating Middesk’s authoritative business data with Bretton AI’s automation capabilities, compliance teams can now automatically pull verified information into their reviews accelerating decision making and reducing manual effort.”
The growth of agentic AI and commerce requires trust-establishing measures, Charnley says. “Ensuring that agents are legitimate, properly authorized, and behaving as expected will require analogous verification frameworks. In many ways, BEV represents the closest existing model to the systems we will need to validate and govern agentic activity at scale.”
As Mack puts it, “The future of KYB isn’t more manual review. It’s better data, delivered in real time, and workflows designed for the speed of today’s economy.”