Three related terms
KYC means know your customer. Australian customer due diligence uses KYC information about individuals and other customer types. KYC is not limited to checking an individual’s identity document.
KYB means know your business. It is an industry label for checks on a business and the people behind it. The label does not define a separate Australian legal duty.
CDD means customer due diligence. It includes initial checks and ongoing work during the customer relationship. A provider’s KYC or KYB product may cover only part of this work.
Sources: AUSTRAC: What you must establish during initial CDD; How to establish matters on reasonable grounds; AUSTRAC: Customer due diligence overview; Initial customer due diligence; Ongoing customer due diligence; Holley Nethercote, hosted by the Institute of Public Accountants: Summary, pages 5 and 6; supplier service categories.
- KYC
Customer information used for identification and other CDD matters.
- KYB
An industry term for business customer checks.
- CDD
The wider duties for identity, risk and the customer relationship.
Compare the terms with the work
KYC and KYB results can support CDD. A supplier’s label does not establish that the full duty is complete.
Separate evidence questions. An answer to one does not settle the others.
What initial CDD covers
Initial CDD requires a reporting entity to establish specified matters on reasonable grounds. These include the customer’s identity and the nature and purpose of the relationship or occasional transaction.
It also covers relevant representatives, beneficial owners, politically exposed persons and targeted financial sanctions. Conditions and modified measures affect what the reporting entity must establish.
The reporting entity also identifies customer risk. An identity match alone does not establish every required matter.
Sources: AUSTRAC: What you must establish during initial CDD; How to establish matters on reasonable grounds; AUSTRAC: Customer due diligence overview; Initial customer due diligence; Ongoing customer due diligence.
Compare the result with the duty
A fictional accounting practice receives a company report and an identity match for its director. The supplier calls this a KYB result.
The practice examines what the report actually establishes. It still needs to address the director’s authority, relevant ownership, customer risk and the purpose of the service.
The name of the supplier’s package does not decide whether these tasks are complete.
Sources: AUSTRAC: What you must establish during initial CDD; How to establish matters on reasonable grounds; AUSTRAC: Customer due diligence overview; Initial customer due diligence; Ongoing customer due diligence.
Where to find each process
The collecting and verifying guide explains KYC information. The company guide explains business customer checks. Initial CDD explains the full initial process.
Ongoing CDD deals with later changes and monitoring. This comparison does not replace those procedures.
Sources: AUSTRAC: What you must establish during initial CDD; How to establish matters on reasonable grounds; AUSTRAC: Customer due diligence overview; Initial customer due diligence; Ongoing customer due diligence.