How banks and fintechs run KYB checks: registry matching, beneficial ownership under 31 CFR 1010.230, and the records examiners expect.
Know Your Business (KYB) is the process a bank or fintech uses to confirm that a business customer is a real, registered company and to identify the people who own or control it. For US banks, the core requirement comes from FinCEN's customer due diligence rule. That rule says a covered financial institution must identify and verify the beneficial owners of each legal entity customer when it opens an account. KYB automation is how a team meets that requirement at scale, without re-doing the same registry lookups and ownership maps by hand for every customer.
Under 31 CFR 1010.230, a beneficial owner is either of two groups. The first is each individual who owns 25 percent or more of the entity's equity, directly or indirectly. The second is one individual with significant responsibility to control or manage the customer, such as an executive officer or senior manager. The rule notes that up to four people may need to be identified under the ownership prong, and only one under the control prong. The institution must identify each beneficial owner when the account is opened and verify each one's identity using risk-based procedures. It may rely on the customer's own information about its owners as long as it has no knowledge of facts that would reasonably call that information into question (31 CFR 1010.230(b) and (d)).
The rule also excludes some entities. Publicly listed companies, SEC-registered investment advisers, and state-regulated insurers are among the exclusions in paragraph (e)(2). An exclusion only means the rule's identification step does not apply to that customer. It does not remove the bank's other due diligence duties.
A workable KYB process usually runs in the same order:
Automation handles the first four steps well when registry and ownership data are available and clean. Registries differ in coverage, format, and how current they are, so a registry match alone does not prove ownership. Where data conflicts, the record should show the conflict and how it was resolved, not a silent choice.
Three failure points are worth designing for. First, ownership maps stop at a holding company, and nobody traces the chain to the people behind it. Second, the control person is never identified, even though the rule requires one in every case. Third, KYB is treated as a one-time onboarding step. Ownership changes after onboarding, and a check made when the account opened does not show who owns the business today.
The Strise guide on KYC and KYB software describes the same shift: teams are moving from point-in-time checks to ongoing monitoring that re-checks a business when ownership, jurisdiction, or sanctions status changes. Stripe's KYB overview describes the same pattern from the payments side, with reverification after any change in shareholders or control.
The beneficial ownership rule sets retention periods for these records. Identifying information is kept for five years after the account closes, and verification records for five years after they are made (31 CFR 1010.230(i)(2)). A good KYB record stores the ownership chart as it was on the date of review, the registry extract, the identity verification result for each person, and the reason any exception was accepted. That record is what an examiner will ask for, so build it while the review happens rather than reconstructing it later.
For the wider AML context, see the AML automation guide and the AI employees for banking compliance guide.
