A third party, in terms of Know Your Customer (KYC), Know Your Business (KYB) and compliance, refers to any external individual, organization, or entity that a company interacts with but is not directly part of the company’s core operational structure. This includes contractors, suppliers, service providers, business partners, intermediaries, and any other entities that perform services or conduct transactions on behalf of the company. In the context of KYC, the identity and integrity of third parties must be thoroughly verified to ensure they meet regulatory standards and do not pose a risk of engaging in illegal activities such as money laundering or fraud.

While the term "counterparty" specifically refers to the other party involved in a financial transaction or contractual agreement, "third party" has a broader application, encompassing all external entities with whom the company interacts. Despite these differences, both terms necessitate rigorous due diligence, compliance checks, and risk assessments to protect the company from legal, financial, and reputational risks. Effective third-party management involves continuous monitoring and evaluation to ensure ongoing compliance with regulatory requirements and to mitigate any potential threats posed by these external relationships. Therefore, although "third party" and "counterparty" can sometimes overlap in meaning, the former has a wider scope, emphasizing all external relationships beyond just direct transaction partners.