How to Vet a Company and Its Beneficial Owners Before a Deal: KYB in Simple Terms

Checking a counterparty by its tax ID confirms the company exists and provides basic registration details — and almost nothing beyond that. It doesn’t show who actually controls the company, whether the person signing the contract is authorized to do so, whether the company has any assets a claim could be made against, or whether it’s headed for removal from the Unified State Register of Legal Entities (EGRUL).

A thorough check is a sequence of several layers, not a single search box: registration data and status, the signatory’s authority, the ownership structure and beneficial owners, litigation, tax, and debt risks, and the Federal Tax Service (FNS)’s own company assessment, which gained a legislative basis in 2026. Below: how to vet a counterparty step by step, who is legally required to do it and who isn’t, how to find beneficial owners, and what changed at the start of 2026.

Why Vet a Company Before a Deal, and What You Risk by Skipping It

A company’s formal existence protects against none of three types of loss — commercial, legal, and tax — and each arises for its own reason.

The cost of getting it wrong isn’t abstract. Money is transferred to a company with no assets and no real operations — there’s nothing to recover. A contract is signed by someone without authority — the deal can be challenged or found never to have been concluded on the company’s behalf. A counterparty is chosen without even a basic check — the tax authority can deny a VAT deduction or disallow expenses, finding that commercial prudence wasn’t exercised. Below: how these risks are addressed in practice, and who is actually required by law to do this.

Is a Business Legally Required to Vet Its Counterparties

The short answer: an ordinary company has no direct statutory obligation to vet a counterparty before every deal. That doesn’t mean vetting is a matter of taste, though — there’s a standard of reasonable conduct, and falling short of it is paid for in taxes, and sometimes out of the director’s own pocket.

What Article 54.1 of the Tax Code Actually Requires

Some articles and forum posts claim that “the obligation to exercise reasonable diligence is enshrined in Article 54.1 of the Tax Code.” That’s inaccurate: the text of the article contains neither the term “reasonable diligence” nor the term “counterparty vetting.” Article 54.1 of the Tax Code sets the limits within which a taxpayer may reduce its tax base: the main purpose of the transaction must not be tax evasion, and the obligation under the transaction must be performed by the party to the contract or by whoever it was transferred to under the contract or by law. This is a rule about consequences, not about an obligation for anyone to vet anyone.

Commercial Prudence: The Standard From the FNS Letter

The standard whose breach lets the tax authority claw back deductions and disallow expenses was set out in FNS Letter No. BV-4-7/3060@ of 10 March 2021 and in case law, not directly in the Tax Code. The FNS calls it commercial prudence:

“Case law proceeds from the standard of prudent conduct in civil (commercial) dealings expected of a reasonable participant under comparable circumstances.”

“…business entities generally assess not only the terms of the transaction and their commercial appeal, but also the counterparty’s business reputation, solvency, the risk of non-performance and whether performance is secured, and whether the counterparty has the necessary resources (production capacity, technological equipment, qualified personnel)…”

Failing to meet this standard has a second consequence that’s rarely written about: it’s a risk not only of additional tax assessments, but also of the director’s personal liability to their own company for losses caused, if the decision to work with the counterparty was made without even a basic check.

Who Is Actually Required to Vet Counterparties Under 115-FZ

A full-fledged regulatory obligation to vet counterparties and their beneficial owners does exist, but it’s addressed to a narrow circle of organizations, not to business in general. Three levels need to be distinguished here.

The first level is the obligation of every legal entity to know its own beneficial owners (Article 6.1 of 115-FZ): take available measures to establish this information, update it at least once a year, retain it for at least five years, and provide it on request to Rosfinmonitoring (the Federal Financial Monitoring Service), the FNS, or the Ministry of Justice within 7 business days. This is an obligation to know yourself, not to vet a counterparty.

The second level is the obligation to identify the beneficial owners of customers (115-FZ, Article 7(1)(2)) — addressed to the closed list of entities under Article 5 (banks, professional securities market participants, insurance organizations, pawnshops, payment acceptance operators, factoring and leasing companies, and others) and entities under Article 7.1 (notaries, attorneys, persons providing legal and accounting services), and for the latter — only when they prepare or execute specific transactions on a customer’s behalf: real estate deals, transactions involving money and securities, and the creation or management of legal entities. For more on how these requirements look in practice for fintech companies, see the article “Fintech Compliance Under Federal Law 115-FZ”.

The third level is where most readers of this article sit: an ordinary business with no obligation under 115-FZ, but with a commercial interest in not losing money and not drawing a tax claim. Everything that follows concerns this level specifically.

How KYB Differs From a Standard Counterparty Check

KYB (Know Your Business) is an industry term — it doesn’t appear in 115-FZ, 129-FZ, or the Tax Code. Writing “the law requires KYB” is incorrect; the correct phrasing is “the industry calls this practice KYB.”

By depth, counterparty vetting forms a ladder, and each level includes the one before it:

Levels C and D are covered in detail in the article “AML, KYB, and Beneficiary Verification: How to Build Compliance for B2B Customers” — here we’ll focus on levels A and B: what almost any business needs before a deal.

What to Check About a Company: The Full List

Registration, Status, and Address

A basic check answers the question of whether the company exists and what state it’s in:

• OGRN, tax ID, registration date, current status
• whether there’s a record of liquidation, reorganization, or an upcoming removal from EGRUL
• whether the address matches what’s stated
• whether there’s a mass-registration flag or a record noting the information as unreliable

The Director and Their Authority

Worth checking:

• who is listed in EGRUL as the person entitled to act without a power of attorney, and whether that name matches the person actually signing the contract
• whether the director has been disqualified
• if a representative is signing — the power of attorney, its validity period, and the scope of authority it grants
• whether the charter limits the director’s authority by deal amount or type — relevant for above-average deals

Participants, Ownership Interests, and Ownership Structure

For an LLC, EGRUL shows the list of participants and the size of their interests — a first, but not final, step toward understanding who stands behind the company; why this still isn’t the beneficial owner, and where the data runs out, is covered in the section on beneficial owners below.

Litigation, Tax, and Debt Risks

This includes:

• bankruptcy proceedings
• involvement in commercial court cases — and in what role, plaintiff or defendant
• enforcement proceedings that have been opened
• tax arrears and failure to file reports

An indirect but informative indicator is how many years the company has been operating, whether it has employees, and its status in the SME register.

Licenses, Restrictions, and Special Registries

If the activity is licensed, it’s worth checking for a valid license matching the OKVED activity codes. Several special registries are also useful for information:

• on the introduction of court supervision
• on signs of insufficient assets
• on a reduction in charter capital
• on the sale or lease of the enterprise
• on pledges of movable property

What Should Raise a Flag

None of the following signs on its own means the counterparty is acting in bad faith — some are explained by technical errors or ordinary corporate procedures. But taken together, and in the context of the deal amount, they deserve attention:

• a record in EGRUL noting the information as unreliable (regarding the address, participants, or director)
• a decision by the registering authority on the company’s upcoming removal from the register
• liquidation or reorganization that the company itself didn’t disclose
• a disqualified director, a mass-registration address, or a mass-registration director
• the introduction of court supervision, or signs of insufficient assets
• tax arrears and failure to file reports for more than a year
• multiple enforcement proceedings and commercial court cases as defendant over unfulfilled obligations
• the company was registered shortly before the deal but is claiming a large contract
• the contract is signed not by the director listed in EGRUL, but by someone without a clear power of attorney
• discrepancies between the company’s documents and registry data
• no license where the activity is licensable
• a refusal to disclose the ownership structure with no explanation

How to Vet a Company Step by Step

Each source covers its own part of the picture and says nothing about what lies beyond it:

One detail older guides don’t mention: mass-registration addresses and mass-registration directors now redirect to “Transparent Business,” where these flags show up in the summary; the register of disqualified persons is still available separately as well as within the same summary. Advice from older guides may now point to a different address.

How to Establish the Beneficial Owner

Who the Beneficial Owner Is and How It Differs From a Founder

Beneficial owner is a term defined in 115-FZ (Article 3), and the definition is worth quoting verbatim:

“A natural person who ultimately, directly or indirectly (through third parties), owns (holds a predominant participating interest of more than 25 percent in the capital) of a customer that is a legal entity, or has the ability to control the customer’s actions.”

There are two independent criteria here, joined by “or”: owning more than 25% of the capital or having the ability to control the company some other way. A person with no ownership interest at all can still turn out to be the beneficial owner if they effectively control the company’s decisions.

The beneficial owner shouldn’t be confused with adjacent roles: a founder is whoever set up the company, and may remain listed in EGRUL historically even after leaving the business; a participant or shareholder is the current holder of an ownership interest or shares; a director runs the company but may not own it; a representative acting under a power of attorney acts within whatever scope that power of attorney defines. All of these roles can coincide in one person, but by default they are different concepts.

Why the Ultimate Beneficial Owner Isn’t in Public Registries

This needs to be said plainly: Russia has no public state registry of beneficial owners. Under 129-FZ (Article 5), EGRUL discloses LLC participants and the size of their interests, and for a joint-stock company — the founders as of incorporation, the fact of having a sole shareholder if there is one, and the details of the shareholder register keeper; EGRUL does not disclose a JSC’s current shareholder composition. A company is required to keep information about its beneficial owners on file (115-FZ, Article 6.1) and disclose it on request to Rosfinmonitoring, the FNS, or the Ministry of Justice — not publicly, and not on a counterparty’s request.

What to Do When the Ownership Chain Runs Out

In practice, this means the following: using public sources, you can trace a chain of owning companies step by step and reach natural persons wherever the chain consists only of LLCs. As soon as the chain includes a joint-stock company, a foreign company from a jurisdiction where the register of owners isn’t public, a trust, or a nominee participant, the public data runs out.

Several paths remain from there: request the information directly from the company itself, include representations as to circumstances regarding the ownership structure in the contract, turn to commercial databases, or — if the stakes are high and the company refuses to disclose its structure without explanation — walk away from the deal. A detailed methodology for building the ownership chain and working with indirect control is covered in the article “AML, KYB, and Beneficiary Verification”.

What Changed on 1 January 2026: The FNS’s Company Assessment

The FNS assessment service, which had operated since 2023 as a departmental tool inside the taxpayer’s personal account, gained a legislative basis and a new procedure on 1 January 2026, and most search results either don’t describe this change or describe it inaccurately.

Federal Law No. 254-FZ of 23 July 2025 added Article 6.3 to the Law of the Russian Federation “On the Tax Authorities of the Russian Federation.” The assessment methodology, the request procedure, and the report forms were approved by FNS Order No. ED-7-31/1041@ of 5 December 2025 (registered with the Ministry of Justice on 26 December 2025, in effect since 1 January 2026).

The gist of the service: the FNS analyzes information about a legal entity’s or sole proprietor’s financial and business activity and issues the result as a report. The assessment is built in two stages: first, baseline criteria (whether there’s information on removal from EGRUL, unreliable data, disqualified directors, or VAT discrepancies with counterparties), then a comprehensive analysis of financial condition — wage levels, tax burden, headcount, liquidity, and profitability. According to an FNS publication, as of mid-2026 the service assesses businesses against 57 indicators.

Precision matters here: the law provides that the report is issued to the legal entity or sole proprietor on its own request “and/or, in cases provided for by federal laws, on the request of another person.” The FNS states this directly: only the taxpayer itself can request a report about itself; banks, customers, and counterparties learn its content only through the taxpayer itself or through a separate information-request mechanism. A counterparty’s assessment cannot be ordered directly from the FNS.

In practice, this works as follows: a company obtains its own report in its personal account — under “Legal Entity Information” → “How the Tax Authority Sees Me” → “Business Assessment Service.” The report is generated as a PDF with the tax authority’s electronic signature within one business day, and a request per template can be made no more than once a day. A counterparty can send the company a request for disclosure through the “For Partners” section, and the company may accept it, decline it, or leave it unaddressed.

The deadlines are set by law: the report is provided to the taxpayer itself no later than one business day after it’s generated; the taxpayer has 5 business days to file an application to correct the data, and the FNS has 5 business days to review such an application; the report is passed to another person no later than one business day after 10 business days have elapsed (if a correction application was filed) or 5 business days (if none was filed).

The practical takeaway for the reader is twofold. You can’t request an assessment of your counterparty directly from the FNS — but you can ask the counterparty to provide its own report or confirm the request, and a refusal itself says something too. And in reverse: it’s worth obtaining your own report, to understand how potential partners see your company.

The FNS report assesses specific registration and financial criteria — it doesn’t show beneficial owners or the ownership structure, and litigation and debt risks are checked through the other sources covered above. One report is part of the picture, not a complete counterparty check.

KYB, KYC, and AML: What’s the Difference

The three terms describe different, related things, and shouldn’t be confused:

For more on vetting natural persons, see the NeuroVision KYC page; for more on screening, see the NeuroVision AML screening page.

An important caveat: KYC and KYB are industry labels — they don’t appear in Russian regulations. The law speaks of identifying the customer, the representative, the beneficiary, and the beneficial owner.

When a Standard Check Isn’t Enough

A standard check from level A and a basic understanding of beneficial owners from level B is enough for most deals. But if a counterparty becomes an ongoing partner, the deal size is large or atypical, or — even more so — if the business itself falls under 115-FZ, the “checked EGRUL” level is no longer enough. That’s when sanctions and PEP screening, list checks, and closer attention to sources of funds come into play — these tools are covered in detail in the articles “How Sanctions Screening, PEP Checks, and Risk Profiling Work” and “AML and Sanctions Compliance”.

How to Build a Vetting Process and What Can Be Automated

A one-off check before the first deal only covers the entry point. For ongoing work with counterparties, it’s useful to formalize a process: which checks run before a contract is signed, who’s responsible for the outcome, where the findings are recorded, and what triggers a repeat check — a large new deal, a change of director or address at the counterparty, or a new lawsuit. Frequency here isn’t regulated by law for an ordinary business as strictly as it is for obligated entities under 115-FZ — but tying checks to specific events works more reliably than an arbitrary “once a year” schedule.

Part of this work lends itself to automation, and part still requires a human decision:

For example, the NeuroVision KYB platform covers the left column of this table. But where the data is contradictory or the ownership chain doesn’t resolve unambiguously, the system hands the case to a specialist for manual review — automation handles data collection and cross-checking, not the decision in an ambiguous situation.

FAQ

Is the beneficial owner the founder or the director?

Neither, by default. The beneficial owner is whoever ultimately owns more than 25% of the company's capital or has the ability to control its actions (115-FZ, Article 3). A founder, a participant, and a director are separate roles that may coincide with this, but don't have to.

What percentage of ownership makes someone a beneficial owner?

The 25% threshold is only one of two independent criteria. A person becomes a beneficial owner if they own more than 25% of the capital, or if they can control the company some other way, even with no ownership interest at all. Both criteria carry equal weight and are joined by “or.”

Can a company's ultimate beneficial owner be found from public data?

Russia has no public state registry of beneficial owners. EGRUL discloses LLC participants and their interests, and for a joint-stock company — the founders as of incorporation, the fact of a sole shareholder, and the shareholder register keeper; EGRUL doesn't disclose a JSC's current shareholder composition. A company keeps information about its beneficial owners on file and discloses it on request only to Rosfinmonitoring, the FNS, or the Ministry of Justice.

Can you request an FNS assessment of your counterparty?

No. The FNS assessment service has operated under Article 6.3 of the Law on Tax Authorities since 1 January 2026, but only the company itself can request a report about itself. A counterparty can ask the company to provide the report or confirm the request, but you can't order an assessment of another organization directly from the tax authority.

Is a business legally required to vet its counterparties?

An ordinary business has no such direct obligation. There is a standard of commercial prudence from FNS Letter No. BV-4-7/3060@, and falling short of it risks additional tax assessments. The full-fledged obligation to vet customers' beneficial owners under 115-FZ is addressed only to banks and other entities under Articles 5 and 7.1 of the law.

How does KYB differ from a standard counterparty check?

A standard check covers status, the signatory's authority, and basic risks before a one-off deal. KYB is a deeper level: the ownership structure, establishing beneficial owners, checking related parties, and repeat checks — relevant for long-term partners and large contracts.

What can you learn about a company from its tax ID, and what can't you?

A tax ID gives you access to EGRUL registration details: status, address, director, LLC participants and their interests, and records of unreliable information or liquidation. A tax ID doesn't show ultimate beneficial owners, a JSC's shareholder composition, or the company's real solvency.

How do you check the authority of whoever is signing the contract?

Cross-check their details against EGRUL if they're the director acting without a power of attorney — including confirming they haven't been disqualified. If a representative is signing, request the power of attorney and check its validity period and scope of authority, and confirm the company's charter doesn't limit the director by deal amount or type.

How does KYB differ from KYC and AML?

KYC is the vetting of a natural person, KYB is the vetting of a company and the people connected to it, and AML is a broader set of measures against money laundering, where customer identification is just one element alongside risk assessment and transaction monitoring. All three terms are industry labels; the law uses the term “identification.”

How often should an existing counterparty be re-checked?

For an ordinary business, the law sets no strict frequency — it's more practical to tie a repeat check to events: a large new deal, a change of director or address, or a new lawsuit. Obligated entities under 115-FZ are subject to regulatory deadlines for updating customer information.

What if a company refuses to disclose its ownership structure?

A refusal on its own isn't proof of bad faith, but it isn't a reason to ignore either, especially if the ownership chain breaks off at an opaque link. You can build representations as to circumstances into the contract, turn to commercial databases, or walk away from the deal if the stakes are high and the company won't explain its refusal.

Can you fully rely on public registries?

Public registries provide reliable registration and status data, but they don't show ultimate beneficial owners, don't always reflect changes instantly, and don't guarantee there are no arrangements behind the company that aren't visible from outside. It's a necessary, but not exhaustive, part of vetting.