KYB for Credit Unions: Key Requirements & How to Implement It

A signature on a form. A company name that checks out. An account was opened, and funds were deposited. Just another business joining your credit union.

Until it isn’t.

One day, the owner changes. Transactions don’t match the business type. A routine review raises questions, and the paperwork that once looked airtight suddenly needs a second look. 

It turns out that the business wasn’t what it seemed, a name, a front, or simply not the right fit for your institution. And now? It’s on your credit union to explain why it got through.

This is why KYB exists. 

Not as a formality. Not as a hurdle. But as the only way to know exactly who’s on the other side before an account becomes a problem.

Let’s break it down.

What is KYB for Credit Unions? 

KYB (Know Your Business) is the structured due diligence process that credit unions must follow to verify businesses before offering financial services. This process is a requirement under key regulations like the Bank Secrecy Act (BSA), Treasury Regulation § 1010.230, and NCUA Regulation § 748.2.

These mandates prevent credit unions from inadvertently facilitating financial crimes, such as money laundering or terrorist financing, while ensuring compliance with anti-money laundering (AML) requirements.

Key KYB Requirements for Credit Unions?

Credit unions have specific compliance obligations when verifying businesses. These key requirements outline the essential steps credit unions must take to meet regulatory standards and protect against risks.

Beneficial Ownership Identification

Under Treasury Regulation § 1010.230, credit unions must identify and verify the beneficial owners of any legal entity customer opening an account. Beneficial owners are defined as individuals who directly or indirectly own 25% or more of the business or have substantial control over its operations. For each beneficial owner, the credit union must collect:

• Full name
• Date of birth
• Residential or business address
• Identification number (e.g., Social Security Number, passport number)

This requirement ensures that no hidden individuals or entities are using the business to launder money or engage in illicit activities. Proper UBO identification also helps credit unions detect politically exposed persons (PEPs) or individuals flagged in sanctions lists.

Business Documentation Verification

Credit unions must obtain and verify critical business documents to ensure the entity’s legitimacy and operational status. Required documents typically include:

• Articles of incorporation or organization
• Partnership or operating agreements
• Corporate resolutions
• State or local business licenses
• Employer Identification Number (EIN) verification

These documents confirm the business’s legal structure, registration, and authorization to operate. 

Additionally, they help establish whether the entity meets the field-of-membership requirements for the credit union. Any inconsistencies or missing documents could be a red flag for potential fraud.

Risk-Based Member Assessments

A comprehensive risk assessment is essential to understand the nature and purpose of a business’s relationship with the credit union. 

Per the FFIEC BSA/AML Manual, credit unions must evaluate factors like the business’s transaction activity, industry type, geographic location, and ownership structure to determine risk levels. 

For high-risk entities, such as money service businesses (MSBs) or marijuana-related businesses (MRBs), credit unions are expected to perform enhanced due diligence (EDD).

These assessments allow credit unions to tailor their KYB approach based on the specific risks posed by the business. For example, MSBs may require additional documentation, such as proof of registration with FinCEN under CFBP Regulation § 1022.380.

Ongoing Monitoring

KYB does not end after the account is opened. It’s an ongoing process. Credit unions must continually monitor business accounts for changes in ownership, operational activities, and transaction patterns. This includes:

• Tracking changes to UBOs or control persons
• Performing regular reviews of high-risk accounts
• Identifying unusual or suspicious transaction patterns that may require filing a Suspicious Activity Report (SAR)

Transaction Monitoring & Reporting

Credit unions must establish systems to monitor transactions for suspicious activity. This includes compliance with regulations like FRB Regulation GG (Prohibition on Funding of Unlawful Internet Gambling) and filing Currency Transaction Reports (CTRs) for cash transactions exceeding $10,000. 

High-risk industries and cash-intensive businesses require additional scrutiny to detect potential money laundering or fraud schemes. If suspicious activities are identified, credit unions are obligated to file SARs with FinCEN. These reports are critical for detecting and preventing financial crimes at a systemic level.

KYB Best Practices for Credit Union

Below are the key best practices credit unions can implement to optimize their KYB efforts (not legal advice).

1. Deploy Screening for Sanctions Lists: Instead of only screening UBOs or businesses, use automated screening tools (like Signzy’s criminal screening API) to run checks against OFAC, SDN, and PEP lists. This ensures nothing is overlooked. For ongoing compliance, set up daily list-refresh synchronization to catch new sanctions or watchlist additions.
2. Create a KYB Playbook for Internal Teams: Develop a comprehensive playbook that outlines every step of the KYB process, tailored for different business categories (e.g., sole proprietorships, partnerships, LLCs). Include detailed workflows for scenarios like handling incomplete UBO information or escalating risk flags to compliance officers.
3. Monitor Cross-Border KYB Compliance Actively: For international business accounts, align KYB policies with country-specific AML laws. For instance, ensure compliance with 4MLD/5MLD in the EU and FinCEN guidelines in the U.S. For businesses operating across borders, validate UBOs through global registries like the Global Legal Entity Identifier Foundation (GLEIF).
4. Conduct Quarterly Audits of KYB Procedures: Set up a structured review every three months to audit completed KYB processes. Look for gaps in documentation, missed UBO verifications, or delays in risk flagging. Use this data to update KYB workflows and plug compliance vulnerabilities.
5. Use Multiple Data Sources for Verification: Cross-reference data from authoritative sources such as state registries, tax authorities, and UBO databases. This ensures accuracy in verifying business legitimacy and ownership details. 
6. Partner with Fintechs for Global Compliance: For international businesses, collaborate with fintech providers that offer integrated global KYB solutions. This simplifies compliance with varying jurisdictional regulations.

KYB Implementation Made Easy

Credit unions don’t need to rely on manual processes to manage KYB anymore. Tools like Signzy’s UBO Check API offer automated, real-time verification of ultimate beneficial owners, ensuring compliance with BSA and other regulations. 

For a full-scale solution, Signzy’s KYB API handles everything—business verification, document checks, and sanctions screening—all in one platform.