KYB for DeFi protocols - Has anyone else encountered this?

I'm exploring institutional onboarding for DeFi protocols. In TradFi, KYC/AML is standard, but in DeFi, which claims to be truly decentralized, I'm finding that many are starting to request KYB (Know Your Business) information, not much different from before. This is especially true when connecting to fiat off-ramps or services involving money transfers in and out.

What I'm wondering is, where do these criteria come from? Or is it a best practice that projects are starting to adopt to mitigate future legal risks? Has anyone experienced friction in this process? Or are there any protocols that handle this more seamlessly than others while maintaining a better sense of decentralization?