Corporate Screening: Overview & Importance in Preventing Money Laundering

corporate screening

In the latest technology world, it is easy for scammers to counterfeit documents. They used advanced innovation and machine learning algorithms to bypass the manual business verification measures. To combat these scammers and prevent businesses from money laundering crimes, law enforcement agencies issue AML/CFT rules. Companies must comply with these regulations. It will protect them from scams and authorities’ hefty fines. Corporate screening is a process that assists companies to comply with these laws. 

What is Corporate Screening?

The companies need to ensure the customer they are onboarding is real and not involved in illicit activities, which can only done by verifying the identity. In the business world, the verification of the user before onboarding is known as the know-your-customer or referred KYC. As with customer verification, the authorities implement measures on companies to verify the business by corporate screening. In simple words, corporate screening is used to know business identity. The adequate KYB demand enhances corporate screening through AML databases.  

The corporate screening verifies the company by its legal identity and screens their ultimate owners against the various databases. According to the AML/CFT regulations, it is a must for the company to ensure the business they are starting is not involved in illicit activities. Additionally, companies need to regularly update their corporate screening to ensure compliance with the latest regulations and that the information they have is accurate. Companies should also periodically review their corporate screening procedures to ensure they remain effective.

AML Compliance through Corporate Screening

Compliance with anti-money laundering regulations is essential for companies that fall under these laws. According to the country’s policies, these can be financial institutes, insurance organizations, real estate businesses, or others. Financial institutes worldwide must meet these obligations to protect the integrity of the country‚Äôs economic system and global financial sector. Given below are the steps for businesses to heads up with AML compliance by corporate screening:

Verifying Business Profile 

The companies gather essential documents such as the license, address, contact, and owner’s name. It assists businesses in ensuring the company they are onboarding is genuine and does not exist only on paper. The legal profile indicates the organization is active. Profile correction is critical to eliminate the company from starting. This saved the time and cost of verifying the bogus business. 

Validation of Profile 

After verifying the profile, the documents submitted by the companies must be validated to ensure their authenticity. It is done by checking the security features of the papers, such as fonts, signatures, or borders of documents. The onboarding company can do this on corporate information by machine learning. This will guarantee the papers are original so the company can onboard customers confidently.

Confirmation the Data 

In this advanced technology world, changing the written data on a document is simple. Anyone can update the original data and use that information to conduct illegal activity. Companies must cross-check corporate documents by verifying them against the original papers. This ensures the information written on the documents about the companies is not counterfeit. The company can also cross-check the official government documents of the corporation from their database to ensure the license number, name, and address are correct. 

Background Check 

After ensuring the profile is original to the company, it‚Äôs time to verify the corporate background. For that, companies gather financial statements and transaction histories to find the real source of funds. This background check ensures the corporate structure is working in a legal environment. In corporate screening, a background check company overview of the investors and real owners’ source of income. It guarantees the bad actors do not use the cooperation for illicit activities and launder money.

UBOs Screening 

The complex part of corporate screening is verifying the company’s ultimate owners. Most corporate structures are complex, and finding their real owners is challenging. For that, they must ascertain the ultimate owner’s identity through AML screening. This will ensure the UBO are real, not dummy owners. It protects the company from bad actors who only create bogus businesses to launder their illegal gain.¬†

The Bottom Line 

Overall, corporate screening is essential for companies that work with other businesses. This will enhance security and bolster company strength. Additionally, it ensures a secure environment for the companies to work confidently with each other. This increases brand loyalty and customer trust in the company. Anti-money laundering regulations compliance is also adequately done by corporate screening. Various corporate screening service providers offer online verification with machine learning technology to get more accurate results.