Whether it’s a supplier in another country, a vendor providing critical services or a new customer to the firm, each and every commercial relationship carries potential risks. The question is: how well do you really know your business partners?
Understanding the risk involved with the entities you’re doing business with is a strategic and regulatory imperative. That’s where the concept of Know Your Third Party (KYTP) comes in. KYTP delivers firms a comprehensive framework that helps organizations manage risk and ensure compliance across their entire network of third-party relationships.
Third-party compliance presents a complex and ongoing challenge for firms of all sizes. Organizations must navigate the regulations of the jurisdictions in which they operate, along with their internal standards and policies, while managing a range of relationships across different business entities. The challenges firms face include:
Without a structured approach, firms risk financial penalties reputational damage and operational disruptions. A single weak link in the third-party chain can have cascading effects across the organization.
To address these challenges, organizations need to understand the different types of third-party relationships within the firm, as well as the risk and compliance challenges that accompany each one.
Understanding the nuances between the frameworks enables firms to better understand, evaluate and monitor risk from the entities they engage with.
KYTP is a holistic approach to third-party risk management. It integrates multiple due diligence processes into a unified strategy that spans the entire third-party lifecycle—from onboarding and screening to monitoring and offboarding.
KYTP enables firms to:
Know Your Customer (KYC) compliance is the process by which financial institutions check the identity of their customers to assess potential risk. This involves collecting and validating key information to screen for potential problematic behavior, enabling institutions to ensure that they are engaging with legitimate clients and allowing them to assess and mitigate the underlying risk each customer may pose.
KYC is the foundation of customer due diligence. It involves verifying the identity of customers, assessing their risk profiles and monitoring their behavior over time. KYC is essential for preventing:
KYC processes include collecting personal and financial information, screening against watchlists, and applying enhanced due diligence (EDD) for high-risk individuals such as politically exposed persons (PEPs). For individuals or entities deemed high-risk—such as politically exposed persons (PEPs)—enhanced due diligence (EDD) is applied, requiring deeper investigation and ongoing monitoring. KYC is a critical safeguard against identity theft, fraud, and the misuse of financial services for illicit purposes and should not be limited to just the onboarding phase.
KYC compliance must extend across the customer lifecycle to identify and understand potential changes to a customer’s risk profile throughout the entire customer relationship.
Know Your Supplier (KYS) provides firms with comprehensive due diligence to assess and manage the potential risk associated with a company's suppliers. KYS compliance requires firms to verify the supplier's identity, financial stability, reputation and compliance with legal and ethical standards to minimize supply chain disruption and ensure that the company is reliable and capable of meeting the firm's requirements.
Know Your Supplier (KYS) focuses on evaluating the suppliers that support your operations. This includes manufacturers, logistics providers and other entities across the supply chain. KYS helps firms:
Effective KYS practices reduce the risk of working with unreliable or non-compliant suppliers and help maintain operational resilience.
Know Your Business (KYB) is about verifying the legitimacy of business entities before entering into financial or strategic relationships to prevent money laundering, fraud, and other financial crimes. This includes:
KYB is critical in financial services, where firms must ensure they are not inadvertently facilitating fraud or money laundering through shell companies or opaque ownership structures.
Vendors provide essential services and technology that enable businesses to operate efficiently. KYV ensures that these vendors are:
KYV also helps firms manage risks related to data privacy, cybersecurity and service continuity. With the rise of outsourcing and cloud-based services, KYV is a critical part of third-party risk management.
In today’s high-risk, high-regulation environment, knowing your third parties is not just about checking boxes—it’s about protecting the business and the reputation of the firm. Whether it’s a customer, supplier, vendor, or business partner, each commercial relationship must be built on trust, transparency and compliance.
MCO provides firms a single platform for effective and efficient third-party compliance across customer, vendor, supplier and business relationships. With MyComplianceOffice and the Know Your Third Party suite, firms can:
With MCO’s integrated approach, firms can effectively and efficiently meet regulatory requirements while gaining deeper insights into their third-party ecosystem.
MCO’s Know Your Third Party suite can help you build a safer, smarter and more compliant third-party ecosystem. MCO equips firms with a comprehensive set of capabilities that span the entire third-party lifecycle—from onboarding through periodic reviews to offboarding. The platform enables firms to collect, validate, and manage entity and related-party data through configurable workflows that support verification and ongoing due diligence, with products that include: