The Question an Invoice Can't Answer
A buyer we worked with wired a 30 percent deposit, about $14,000, to a supplier whose product photos and factory videos all checked out. The goods never shipped. When he dug into it, the company had been registered four months earlier, its registered office was a mailbox, and the bank account sat in a third country. The name on the invoice was real. The entity behind it was empty.
That's what KYC is for. Banks have been required to do it for years. Buyers are learning they need to do it too, because in a wire transfer, the company name is just a label, and the real owner is whoever you never checked.
KYC and UBO, Defined
KYC stands for Know Your Customer, or more accurately here, Know Your Counterparty. The UBO is the ultimate beneficial owner, the real person who owns or controls 25 percent or more of the company. That threshold is set by the FATF, the global anti-money-laundering standard-setter, and most national registries now require the UBO to be disclosed.
The goal is simple: before money moves, you know the legal entity, the humans behind it, and whether either appears on a sanctions or adverse-media list.
The Document Set
For a serious order, ask for four things up front:
- Business license or certificate of incorporation. Confirms the legal entity actually exists.
- Shareholder register. Shows who owns what percentage.
- Articles of association. Shows the ownership and control structure, including any unusual voting rights.
- Signed UBO declaration. A written statement of who the 25 percent or more owners are, under penalty of law in most jurisdictions.
A supplier that stalls on any of these is telling you something. Legitimate companies hand these over in a day. Shells and fronts start explaining why they can't.
Where to Verify
| Jurisdiction | Primary registry | What you can confirm |
|---|---|---|
| China | National Enterprise Credit Information Publicity System | Legal entity, shareholders, status |
| UK | Companies House | Directors, persons with significant control |
| US | State secretary of state + SEC EDGAR | Formation, filings, beneficial owners |
| EU | National business registers | UBO registers (where public) |
Then run a sanctions screen against the OFAC SDN list, the EU consolidated list, and the UN list. These are free, public, and take minutes.
Red Flags That Stop a Deal
Five signs come up again and again. A company registered in the last six months with no operating history. Nominee directors or bearer shares that hide the real owner. An ownership chain with multiple holding layers through tax-haven jurisdictions. A registered office that's a mail-drop or a residential unit. A bank account in a third country that doesn't match where the company operates. Any two together, treat the supplier as unverified until a deeper check clears them.
The Compliance Deadline Nobody Planned For
This isn't just good practice anymore. Supply chain due-diligence laws are piling up, from the US UFLPA to the EU's CSDDD, and each one pushes the burden of proving you know your counterparty back onto the buyer. The trend runs one way: the buyer who can't show who owns their supplier is the buyer who eats the fine.
What It Costs
A basic registry check is free. A structured KYC screen from a compliance vendor, covering registry data, sanctions lists, and adverse media, runs about $50 to $500 per entity and returns in one to three business days. For a big or high-risk order, an enhanced check with a local agent costs more but is still a fraction of one lost deposit. On an order above $10,000, KYC costs less than the wire-transfer risk it removes.
Common Questions from Buyers
What is KYC and why does a B2B buyer need it?
How do I verify a supplier's ultimate beneficial owner?
What are the red flags that a supplier is a shell company?
How much does supplier KYC cost and how long does it take?
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