KYC, KYB, KYT: Know your K-Y terminology

K…Y…What?! Learn the abbreviations that will help you safeguard your fintech business

Wondering if your financial services business complies with the latest AML, KYC, and KYB regulations? Are your customer due diligence processes preventing fraudsters from onboarding to your fintech? And what’s with all the acronyms anyway?

Before you go and perform KYC checks on your new customers, get to know these key identity risk assessment acronyms and their definitions:

• ABC (anti-bribery and corruption) — policies and procedures designed to prevent bribery, corruption, and other unethical business practices. ABC programs help financial institutions and fintechs detect and mitigate risks related to improper payments, conflicts of interest, and influence over decision-makers.
• AML (anti-money laundering) — laws or practices to prevent money laundering, terrorist financing, and other financial crimes, as well as to identify individuals who conduct illegal activities. This includes screening against sanctions lists and monitoring transactions to detect suspicious patterns.
• BOI (beneficial ownership information) — the identifying data that must be reported about a company’s beneficial owners, including name, date of birth, address, and ID number. BOI is a key business data set collected under US regulations to increase transparency and prevent the misuse of anonymous entities.
• BSA (Bank Secrecy Act) — the cornerstone of AML legislation in the US. Enacted in 1970, the BSA requires financial institutions to help government agencies detect and prevent financial crimes by keeping detailed transaction records and filing reports. The Act forms the foundation for today’s AML and KYC regulations and is enforced by FinCEN.
• CAP (customer acceptance policy) — confirming the identity of a potential customer before agreeing to conduct business with them.
• CIP (customer identification program) — more generally referred to as KYC, the set of federal requirements for financial institutions to verify the identity of all potential customers.
  
  Recommended reading: Weighing the opportunities and challenges of the new CIP requirements
• CDD (customer due diligence) — the basic level of background checks and identity verification required for all customers. CDD includes collecting and verifying customer information, understanding the nature of their business relationship, and conducting basic screening against watchlists.
• CTR (currency transaction report) — a report that financial institutions must file with FinCEN for any cash transaction exceeding $10,000 in a single day. CTRs help regulators detect potential money laundering or structuring, where individuals attempt to evade reporting thresholds by breaking up large transactions.
• EDD (enhanced due diligence) — when a higher degree of scrutiny is applied to customers or businesses that present higher risk levels.
• FinCEN (Financial Crimes Enforcement Network)— the US Treasury bureau responsible for enforcing the Bank Secrecy Act (BSA) and safeguarding the financial system from money laundering and terrorist financing. FinCEN collects and analyzes data from SARs, CTRs, and other reports to identify illicit activity and works closely with financial institutions to strengthen AML compliance programs.
• KYC (know your customer) refers to verifying a customer's identity during the onboarding process. KYC verification can involve assessing the validity of a new customer’s documents (such as their driver’s license) to confirm that the person is who they say they are.
• KYB (know your business) — verifying the authenticity and risk level of a business through multiple checks. This includes confirming business registration, ownership structure, beneficial owners, and screening company principals against sanctions lists and adverse media. For example, if an e-commerce startup applies for a digital loan, KYB checks would verify both the business's legitimacy and the backgrounds of all owners and key stakeholders.
• KYCC (know your customer’s customer) — expands traditional KYC to include the customers your business clients serve. For B2B2C fintechs, banking-as-a-service (BaaS) platforms, or payment processors, KYCC helps uncover risks that may be hiding downstream, like fraudulent end users accessing your services through a partner platform.
• KYT (know your transactions) — ongoing monitoring of financial transactions to detect suspicious patterns and potential financial crimes. KYT checks analyze transaction frequency, amount, and timing to flag unusual or high-risk behavior. For example, if a business account receives weekly wire transfers of $9,000 (just under the $10,000 reporting threshold) followed by immediate transfers of $8,500 to another account, these transactions may indicate suspicious activity.
• PEPs (politically exposed persons) — individuals with prominent public functions who may pose higher risks for potential corruption. The verification process for PEPs involves screening global databases, verifying the source of funds, monitoring transactions more closely, and checking family members and close associates of the individual with a high-risk profile.
• pKYC (perpetual know your customer)— also known as continuous KYC or ongoing KYC, the automated process of reverifying customer identities and screening against sanctions lists based on specific risk-based triggers rather than at fixed periodic intervals. Unlike traditional periodic reviews that rescreen customers annually or every few years, pKYC enables real-time monitoring through event-based triggers such as sanctions list updates, changes to customer PII, risky transactions, or new beneficial owners. Learn more about pKYC
• pKYB (perpetual know your business) — also known as continuous KYB or ongoing KYB, the automated process that replaces periodic reviews with continuous, event- and schedule‑driven monitoring and automated re‑verification of a business, its ownership (UBOs/directors), and representatives.
• PII (personally identifiable information) — any data that can be used to identify a specific individual, such as a name, address, phone number, Social Security number, date of birth, or driver’s license number. In the context of KYC and KYB, financial organizations must securely collect, store, and process PII to verify identities without exposing sensitive information.
• RBA (risk-based authentication) — an AML and compliance principle that tailors due diligence and monitoring efforts to the level of risk each customer or business presents. 
• SAN (sanctions screening) — the process of checking individuals and entities against global watchlists, including OFAC, EU, and UN sanctions lists, to ensure compliance with international regulations.
• SAR (suspicious activity report) — confidential reports that financial institutions and fintechs must file with regulators when they detect potentially suspicious transactions or illicit activities.
• UBOs (ultimate beneficial owners) — individuals who own or control 25% or more of a legal entity. These persons must be identified as part of KYB verification to prevent money laundering through shell companies.

Okay, but does having a KYC/KYB process really matter?

Regulatory frameworks require financial institutions to verify individual customers and business entities, their ownership structures, and beneficial owners. In the first half of 2025 alone, regulatory fines surged 417% year-over-year, with global financial institutions facing $1.23 billion in penalties across 139 enforcement actions — signaling regulators' intensifying focus on AML compliance, sanctions violations, and financial crime prevention. If you don’t want to be fined for noncompliance with federal and state KYC regulations, then KYC/KYB processes do matter.

Remember that these regulatory requirements exist for a reason. (Can you imagine providing unwitting support to a money-laundering ring?) 

In the United States, the Patriot Act established foundational KYC and KYB requirements. Meanwhile, anti-money laundering directives continue to shape individual and corporate identity verification in the European Union. Specific requirements may differ across jurisdictions, but regulatory frameworks generally aim to prevent financial crimes through robust identification and monitoring.

Protect your fintech business with real-time KYC and KYB automation

Implementing an effective risk management process isn’t as daunting as it might seem. With an automated digital KYC process, you can fulfill regulatory requirements without having to rely on internal resources.

Your KYC/KYB process is critical to managing your fintech’s customer risk. The ability to fine-tune your ongoing monitoring and onboarding fraud models will help you streamline your identity verification processes, reduce false positives, and adapt as digital security challenges continue to evolve.

The good news is that solutions exist to help you grow your user base while meeting KYC and KYB compliance.

How Alloy can help your fintech meet KYC/KYB requirements

Alloy’s identity and fraud prevention platform uses advanced artificial intelligence and machine learning to automate KYC and KYB processes. Our KYC API connects multiple data source products (including KYC and KYB solutions), giving you a holistic view of each customer while eliminating the underlying friction associated with fraud prevention.