Tokenized trust: rethinking corporate KYC with digital identity tokens

Dr. Henry Balani from Encompass Corporation explores how corporate digital identity tokens can transform and enhance corporate KYC processes.

KYC (Know Your Customer) processes are one of the most essential—and frustrating—parts of financial services today. For banks and other regulated institutions, verifying the identity of a corporate customer is often time-consuming, expensive, and inefficient. Each time a new relationship begins, banks request the same information: proof of incorporation, beneficial ownership, tax status, regulatory filings, and other information that could be easily available elsewhere. This is not just inefficient— apart from the perceived poor customer service, it can be a regulatory risk as outdated records, forged documents, and siloed systems make it hard to get a clear, current view of a corporation’s identity. Banks end up onboarding corporations that can be shell companies, disguising their nefarious intentions including money laundering and other illegal activities.

But what if corporations could hold verified digital credentials—similar to a secure passport—that could be easily shared with financial institutions and instantly verified?

That is the promise of corporate digital identity tokens: tamper-proof, machine-readable credentials issued by trusted authorities and reused across multiple onboarding processes. The Bank for International Settlements recently published a report extolling the virtues of tokenization in reshaping the financial system with ‘significant implications for payments and financial markets, offering increased efficiency and accessibility’. Tokenization could be extended to radically simplify KYC procedures, reduce fraud, and create a more interoperable and trusted ecosystem for banks and corporations to use.

This article introduces a new framework that uses corporate digital identity tokens to reshape how we think about KYC for onboarding legal entities including corporations. Drawing from emerging standards in digital identity and real-world initiatives like Singapore’s MyInfo Business and the EU’s eIDAS 2.0 regulation, this model proposes a more efficient, secure, and scalable way to build trust in the financial system.

While retail customer onboarding has seen significant improvements thanks to biometrics, digital wallets, and mobile-first onboarding, corporate KYC still lags behind. This is due to the additional complexity of the verification process and the underlying regulatory compliance requirements. Legal entity verification often involves manual document checks, follow-up emails, delays, and inconsistencies especially across multiple jurisdictions if the corporation operates out of several countries or regions. Banks often employ internal disparate systems to retrieve customer data that can be incomplete and out of date, requiring repeated customer outreach for current information.

Even when corporations have been vetted once, they must repeat the process with every new bank or financial institution. Each KYC review is typically conducted on a standalone basis by each bank and sometimes by individual lines of business within a bank, leading to:

• Duplicate effort across banks and lines of business,

• Fragmented data, often manually entered,

• Limited transparency into beneficial ownership,

• Risk of outdated or falsified documents,

• Inconsistent application of regulatory KYC requirements across different jurisdictions.

For banks, this results in higher compliance costs and potential exposure to regulatory penalties for failure to accurately identify sanctioned entities. For corporations, it creates onboarding friction and slows access to financial services—particularly for smaller businesses and larger cross-border clients.

The solution is inspired by recent developments in decentralised identity (DID), verifiable credentials (VCs), and tokenization. These technologies allow organisations to issue cryptographically secure digital credentials that can be verified independently by third parties.

In this framework, trusted sources—such as corporate registries, tax agencies, or regulated service providers—issue digital credentials related to a legal entity. The attributes may include:

• Jurisdiction of incorporation;

• Legal entity name and registration number;

• Active/inactive status;

• Beneficial ownership declarations;

• Regulatory licenses;

• Tax residency and compliance records.

Each credential is packaged as a token—digitally signed, tamper-proof, and linked to a specific entity. The corporation stores these tokens in a secure digital wallet. When onboarding with a bank, the corporation presents these tokens, and the institution can instantly verify the authenticity and source without needing to go back to the issuing authority.

Here’s how the tokenized corporate identity ecosystem would operate:

1. Issuers – trusted entities (government registries, tax bodies, regulated data providers) issue verifiable credentials about a corporation.

2. Holders – corporate entities receive and store their credentials in digital wallets. They control access and decide who to share them with.

3. Verifiers – banks and other financial service providers request and verify credentials as part of onboarding or ongoing due diligence.

4. Trust Registry / Network – a shared infrastructure or protocol ensures that issuers are legitimate, credentials are up to date, and revoked tokens can be flagged.

To ensure interoperability, the system can adopt open standards such as W3C Verifiable Credentials, Decentralized Identifiers (DIDs), and JSON-LD data formats. The result is a decentralised, privacy-preserving approach to validate corporate identity without sacrificing compliance or control. Additional layers of security and verification can be created using a trusted blockchain that is tamper-resistant and provides traceability and provenance for each corporate digital identity token.

The use of digital identity tokens for corporations offers several compelling advantages:

• Speed: verifications that once took days or weeks can happen in real-time.

• Cost savings: reusable credentials reduce the need for repeated due diligence and manual document review.

• Improved accuracy: tamper-proof tokens eliminate the risks of falsified or outdated documents.

• Portability: corporate identity can be securely reused across multiple banks, financial institutions, and jurisdictions.

• Auditability: verifications are recorded and traceable, helping institutions meet regulatory obligations.

• Privacy and control: companies only share the specific data fields required for a given use case.

This concept is not purely theoretical. Governments and regulatory bodies are already moving toward digital corporate identity systems:

• Singapore’s MyInfo Business allows companies to consent to sharing government-issued business data with financial institutions during onboarding. It has already shown success in reducing KYC time from weeks to hours.

• The EU’s eIDAS 2.0 framework introduces European Digital Identity Wallets that can include legal entity identifiers (LEIs) and other corporate attributes.

• ISO 23220, a new series of standards, is focused on digital identity for organisations.

• Industry initiatives like the Global LEI Foundation (GLEIF) are exploring how legal entity identifiers can be embedded into digital credentials.

The opportunity now lies in connecting these building blocks into a usable, trust-based framework for financial services in general and banking in particular.

Implementation considerations

Of course, implementing this framework comes with challenges. These include:

• Establishing governance to define who can issue credentials and how they’re trusted;

• Ensuring data privacy and GDPR-compliant data handling;

• Creating revocation and update mechanisms so that outdated tokens are removed and do not linger in circulation;

• Aligning with regulators to ensure acceptance of token-based verification as a valid form of KYC.

However, these challenges are not insurmountable. As more jurisdictions adopt digital identity standards, a path forward is emerging for a unified, global model.

Given these considerations, there are existing solutions today that address the need for automated and improved KYC onboarding processes while also laying the foundation for CDI tokenization. As with any solution, the need for streamlining data management is key. The foundational infrastructure includes real-time collation of relevant data, both from public and private sources to provide a complete picture of the corporation for KYC purposes. This complete picture is essentially the CDI profile offered by existing solution providers including from Encompass Corporation. Currently, existing CDI profiles can be tokenized similarly to other digital assets that are available today.

As financial crime grows more sophisticated and onboarding demands more efficiency, it is clear the KYC model for corporate onboarding can be improved. Corporate digital identity tokens offer a fresh, forward-thinking solution—one that promises not just compliance, but speed, transparency, efficiency, and trust.

By reimagining identity as something dynamic, verifiable, and portable, we can move toward a world where corporations can onboard in minutes, not weeks, and where banks spend less time on inefficient KYC processes and more time assessing true risk.

About Dr. Henry Balani

Dr. Henry Balani is a financial services executive with over 25 years of experience in the regulatory technology and consulting industries. In his current role as Global Head of Industry & Regulatory Affairs, he oversees relationships with Industry Analysts and Regulatory Agencies with a focus on raising Encompass’ profile as a leader in addressing financial crime through RegTech solutions. In his previous role as Global Head of Strategic Affairs at Accuity (now LexisNexis Risk Solutions), he advised banks, money services businesses, and financial technology firms on implementing compliance solutions related to anti-money laundering (AML), KYC, and OFAC sanctions. Dr. Balani regularly speaks at major regulatory compliance conferences and has advised US government agencies on the operational impact of AML and OFAC regulations in the financial services industry and has acted as a consultant to international government agencies including the IMF, FATF, and the World Bank.

About Encompass Corporation

Encompass Corporation (Encompass) transforms regulatory compliance and customer onboarding with Know Your Customer (KYC) automation. As a global leader in automated KYC due diligence worldwide, Encompass serves global banks and financial institutions to streamline their KYC process and comply with regulations and requirements. Launched in 2012, Encompass serves customers across the globe and features offices in Amsterdam, Belgrade, Glasgow, London, New York, Singapore, and Sydney.