Know your supplier
KYSAlso called supplier due diligence, know your vendor
Know your supplier, or KYS, is the process of verifying who a firm's suppliers are and assessing the risks they bring. It applies KYC-style checks to the supply side: identity, ownership, sanctions exposure, bribery risk and labour practices. Forced labour and supply chain laws in the UK, EU and US have made it a compliance function.
How it works
Before onboarding a supplier, a firm verifies its legal identity and beneficial owners, screens it against sanctions and adverse media, and assesses country and sector risk. Higher-risk suppliers answer questionnaires and may face audits. The checks repeat at set intervals and when ownership or risk signals change.
KYS matters because supplier failures become the buyer's problem. A sanctioned owner can freeze payments. Forced labour in a supply chain can block imports into the US and, from December 2027, the EU market. UK companies with turnover of £36 million or more must also publish an annual modern slavery statement.
The rules
Requires an annual statement on steps taken to ensure slavery and human trafficking are not taking place in the business or its supply chains.
Commercial organisations with turnover of £36m or more supplying goods or services in the UKPresumes goods made wholly or partly in Xinjiang are made with forced labour and bars their import unless rebutted.
Importers of goods into the United StatesBans products made with forced labour from the EU market, with authorities able to order withdrawal and disposal.
Firms placing products on, or exporting from, the EU marketCommon questions
How is KYS different from KYC?
KYC verifies customers to manage money laundering risk. KYS verifies suppliers to manage risks such as sanctions, bribery, fraud and forced labour. The checks overlap, including identity and ownership verification, but KYS is driven by procurement and supply chain law rather than AML rules.
Is know your supplier a legal requirement?
No single law uses the term. Duties come from several laws, including sanctions rules, anti-bribery law, the UK Modern Slavery Act and forced labour import bans in the US and EU. Financial firms also face outsourcing rules for material service providers.
What does a KYS check include?
Typical checks cover legal identity, beneficial ownership, sanctions and PEP screening, adverse media, financial health and country risk. Higher-risk suppliers may also face labour practice audits, certification checks and questionnaires on subcontractors.
