KYC vs AML: Complete Global Guide to Key Differences and Best Practices (2025-26)

KYC (Know Your Customer) is a fundamental component of AML (Anti-Money Laundering) regulations, requiring financial institutions to verify the identity, suitability, and risks associated with customers to prevent illegal activities such as money laundering and terrorism financing.

KYC is the first line of defense for both regulated and non-regulated businesses as it takes place when bringing new customers on board. It provides an opportunity to spot potential criminals before they become customers (for example, by spotting a fake ID), preventing financial crime from taking place through a business. 

However, KYC alone is not enough to prevent financial crime: customers must be continually monitored for signs of criminal activity. Where suspicious activity is detected, businesses are required to investigate and report to the appropriate authorities. This is all part of a broader AML framework that businesses need to have in place to meet their regulatory obligations.

Non-compliance with KYC and broader AML laws can carry significant risks, including the potential for regulatory penalties, financial losses, and reputational damage. 

So, to deter criminals and comply with Anti-Money Laundering (AML) regulations, companies must set up internal policies and systems that can spot potential criminals before they become customers. At the same time, continuous monitoring of existing customers for suspicious and illegal activities should remain a priority. Any signs of criminal activity must be promptly investigated and reported. But before doing so, it’s essential to learn about the differences between all the basic components, as they can easily get mixed up.

In this article, we’ll dive deep into KYC and AML, the compliance implications, and how to build smooth and secure user onboarding flows.

What is KYC (Know Your Customer)?

Know Your Customer (KYC) is the process of obtaining information about the customer and verifying their identity. Its purpose is to determine if customers are who they say they are. KYC is often followed by Customer Due Diligence (CDD), where the verified information is used to assess the customer’s risk of money laundering or terrorist financing (ML/TF) and assign them a level of risk for ML/TF, based on various factors.

The scope of identity information to be obtained varies by jurisdiction. Usually, businesses need at least the following data:

• Name
• Date of birth
• Address.

During the verification process, customers provide businesses with certain credentials, such as their ID. It’s on the businesses to ensure that submitted documents aren’t fake and that customers are who they say they are. This is done through various checks, including verifying documents, liveness checks, and consulting government databases and lists.

Suggested read: KYC Guide 2024 – What is KYC and Why Is It Important?

What is AML (Anti-Money Laundering)?

Anti-Money Laundering (AML) is a series of measures and procedures carried out by financial institutions and other regulated entities to prevent financial crimes. For regulated businesses, this includes analyzing customers and their transactions, recordkeeping, reporting to AML authorities on suspicion of money laundering, and so forth.

The Financial Action Task Force (FATF) sets global AML standards, which are then adopted by individual jurisdictions on the national level.

National authorities also issue guidelines that help businesses understand their AML obligations.

Regulated entities are required to adopt a risk-based approach to AML compliance, while non-regulated entities are encouraged to do the same and implement robust AML procedures. This involves assessing the level of risk each customer poses so that appropriate steps can be taken to mitigate any risk of fraud and money laundering without wasting resources or limiting legitimate customers’ access to financial products and services.

KYC vs AML: What’s the difference?

AML involves a broad range of measures, usually referred to as an AML compliance program. KYC is just one component of this program, and is therefore encompassed by AML.

In recent years, it’s become clear that KYC alone isn’t enough anymore to stop criminals from scamming companies. Our research shows that 70% of fraud takes place after KYC. So, while KYC remains an important part of any company’s security structure, it’s paramount that a more holistic approach is taken.

AML program requirements can vary across jurisdictions. But, usually, they involve the following:

• AML compliance officer appointment
• AML training programs for staff.
• KYC and Customer Due Diligence (CDD)
• Enhanced Due Diligence (EDD), when needed
• Risk assessment
• AML policies and internal controls
• Ongoing monitoring
• Suspicious activity and transactions reports
• AML compliance officer appointment
• AML training programs for staff

AML vs KYC, a side-by-side comparison

	AML	KYC
Scope	Preventing money laundering and maintaining regulatory compliance	Knowing who the customers are and the risks they may pose
Focus	Detecting, investigating, and reporting signs of money laundering.	Verifying customers’ identities, investigating their background, and determining their individual risk of money laundering. Once verified, Customer Due Diligence (CDD) reviews their background and assesses their individual risk of money laundering or terrorist financing.
Key processes	<ul> Taking a risk-based approach to AML Creating an AML framework Appointing an AML compliance officer AML staff training Customer onboarding (including KYC) Transaction monitoring to identify suspicious activity Investigating suspicious activity Reporting suspicious activity to the appropriate authorities Keeping accurate records in line with regulatory requirements </ul>	<ul> Collecting identity information from customers Verifying the accuracy of this information Customer due diligence (CDD) Risk assessment (to assign each customer a level of risk) Enhanced due diligence (EDD) for higher-risk individuals Regularly reviewing customers’ ID information and risk level </ul>

Suggested read: Anti-Money Laundering (AML) Policy: Step-by-Step Guide (with Template)

Why KYC and AML work together

KYC (Know Your Customer) is a key part of any AML program. It is the process by which new customers have their identities verified and their individual levels of risk assessed.

KYC involves:

• Identifying new customers. Collecting information such as their name, address, and date of birth.
• Verifying their identity. Checking the information a customer has given is accurate using resources such as official documents and government databases. 
• Carrying out Customer Due Diligence (CDD) to determine customers’ level of risk. Looking at things such as the customer’s source of funds and whether they are on any official lists of high-risk individuals (e.g., politically exposed persons (PEPs) or sanctioned individuals).

Without effective KYC, an AML program cannot function properly, as there would be no way to know who customers are, whether they are who they say they are, and what steps need to be taken to mitigate any money laundering risks.

Where and when are KYC and AML required?

AML compliance, including KYC, is mandatory for regulated entities under AML/CFT regulations. The scope of regulated entities varies across jurisdictions. Usually, this includes:

• Financial institutions
• Credit institutions
• Insurance companies
• E-money institutions
• Payment institutions
• Virtual Assets Service Providers (VASPs)
• Gambling service providers
• Art dealers, etc.

VASPs fall under AML regulations in many countries, including the US, Canada, the UK, France, Singapore, Japan, South Korea, and others. Whereas, in some other countries, VASPs aren’t yet even written into law, or are banned altogether.

KYC/CDD is required in a number of cases described by national AML regulations. Usually, they include, but are not limited to, cases when the client:

1. Establishes a relationship with a business for the first time (for example, opening an account at a bank or crypto exchange platform);
2. Makes a transaction exceeding the amount defined by AML regulations;
3. Poses suspicions in relation to money laundering/terrorist financing.

❗Implementing KYC is also important for non-AML obliged entities, such as transportation or e-commerce companies, to reduce fraud risk, prevent the use of their businesses for money laundering, protect their reputation, and ensure customer trust.

Challenges in KYC/AML compliance (2026)

Anyone involved in KYC and AML compliance will face a number of challenges, but the good news is that these can all be overcome with the right approach and resources. The following are some of the most common challenges and how they can be mitigated.

An ever-changing regulatory landscape

AML regulations are updated frequently to strengthen protections and match the changing tactics of money launderers. AML/KYC frameworks must stay up-to-date with these changes to maintain compliance, which can be laborious. Any gaps in a framework created by a change to regulations could expose a business to the risk of penalties and reputational harm.

Choosing the right AML and KYC tools can help with this. Look for tools that are regularly updated to match the latest changes in the law, so you can be confident that they and you will remain compliant.

Lack of resources

Many AML teams struggle with a lack of resources, especially when a business is scaling rapidly. This can lead to bottlenecks in areas such as customer onboarding, hampering a business’s ability to grow.

Scalable AML and KYC tools can help by allowing you to rapidly add extra capacity when needed. Because many processes are automated, this additional capacity can be added without increasing headcount. Automation doesn’t just make processes faster; it often reduces the risk of human error as well. For example, detecting deepfakes or manipulated images (e.g., Photoshop edits) is very difficult and time-consuming for humans. Automation and AI can perform these tasks quickly and with high accuracy.

False positives

False positives occur when a legitimate customer or transaction is flagged as suspicious. This can happen for a number of reasons, including having criteria that are too broad or sensitive, and failure to properly risk-score customers. False positives can waste resources on unnecessary investigations and can prevent genuine customers from being onboarded.

Good AML and KYC tools reduce false positive rates using technology such as AI to learn from data, understand context, and make real-time adjustments to monitoring criteria.

Cross-border complexities

Where a business operates across more than one jurisdiction, it will often need to comply with different regulations in different markets. This can create challenges for compliance teams who will need to be familiar with these different regulations, and AML systems will need to be designed to work with the requirements of the different regimes.

Choosing AML and KYC tools that are designed for international markets can make it much more straightforward to meet the requirements of different regulatory regimes smoothly and cost-effectively.

Fraudsters using sophisticated tactics and exploiting gaps

As AML systems become more sophisticated, criminals adapt to use new tactics and exploit gaps in those systems. Examples of this include:

Deepfakes and synthetic media. Fraudsters increasingly use AI-generated images, videos, or documents to bypass KYC checks. Standard document verification or facial recognition may fail against sophisticated deepfakes unless tools use advanced detection technology. For example, global cryptocurrency exchange MEXC spotted 3,097 fraudulent liveness cases using AI deepfake technology in July–August 2025, representing a 15% increase on the previous period.

Money mule networks with clean identities. Criminals often recruit or coerce individuals with legitimate, verified identities to move illicit funds. Because these “mules” pass KYC checks, detection requires behavioral monitoring, transaction analysis, and network-based risk assessment, not just static identity verification.

Targeting smaller entities and those in less well-regulated areas and sectors. Smaller businesses tend to have fewer resources and less sophisticated KYC/AML processes, even if they are regulated and thus have AML obligations. Small regulated businesses (e.g., payment solutions) are commonly approached by the fraudsters because they are rarely reporting suspicious activity or are not well-informed about proper AML procedures. Money launderers also largely target non-regulated businesses, because they often face less oversight, weaker compliance controls, and fewer reporting requirements, making it easier to move illicit funds undetected.

Staying current with criminals’ latest strategies can be difficult, especially for businesses that do not adopt the latest technology.

AI-powered AML/KYC tools are one of the most effective ways of proactively responding to new and emerging threats.

Ineffective risk culture

Risk culture is often overlooked, yet it can undermine even the most well-designed AML framework. If employees do not understand the importance of AML risk management, lack the necessary knowledge, or do not adopt the right mindset, there is no guarantee that processes will be followed effectively.

Building a strong risk culture must start at the top and be reinforced at every level of the organization. The entire team should be engaged through targeted training and appropriate incentives. The right tools can support this effort by streamlining training, reducing the administrative burden of AML compliance, and helping secure buy-in from all relevant personnel.

Key global KYC/AML regulations (2025-2026)

Each country has its own set of regulations, which require detailed descriptions of the reporting processes, as well as potential penalties.

In recent years, there has been a trend toward tighter AML regulations globally. For example, Australia introduced The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024, which aims to bring the country’s AML regime in line with international standards and will come into force in 2026. Meanwhile, the EU has passed a new AML Regulation (AMLR), which will ensure the same robust standards apply to all EU member states. The EU AMLR will take effect from July 1, 2027. 

Canada has also strengthened its financial crime regulations through amendments to its existing regime. Changes introduced by these amendments include expanding the scope of the country’s AML regulations to apply to a wider range of businesses and professionals, adding new criminal offenses for money laundering, and increasing penalties for financial crime.

Are global KYC and AML regulations getting tighter?

Generally, yes. AML/KYC regulations are expected to become increasingly comprehensive in the coming years, with stricter rules and the closing of existing loopholes. Regulators are expanding AML obligations to cover a wider range of industries, aiming to prevent money laundering, fraud, and terrorist financing in areas that were previously lightly regulated. As part of this trend, companies in these industries are expected to implement robust AML and KYC controls.

The Financial Action Task Force (FATF) (which sets the international standards for combating money laundering and terrorist financing) updated one of its key recommendations in 2025 to encourage a risk-based approach to preventing financial crime. This is likely to influence future regulations and the way businesses must approach compliance with existing regulations.

In the US, the recently proposed Art Market Integrity Act would place art brokers under AML obligations to tackle concerns that the art market is being regularly used for money laundering.

The UK has recently completed a consultation on making its money laundering regulations more effective. The UK government is now looking to implement measures such as improved guidance for onboarding and customer due diligence to promote a risk-based approach.

Moreover, some regulatory initiatives address fraud prevention measures for both regulated and non-regulated companies. In the United Kingdom, the corporate criminal liability offense of “failure to prevent fraud,” introduced under the Economic Crime and Corporate Transparency Act 2023, has officially come into force. This legislation holds large organizations criminally liable if their employees, agents, subsidiaries, or other associated persons commit fraud to benefit the organization.

Suggested read: Breaking News, Explained: UK’s ‘Failure to Prevent Fraud’ Law Takes Effect

Main AML/KYC regulations by country in 2025 and beyond

Below, we cover the main AML regulations for some of the world’s leading economies, followed by our list of articles covering KYC and AML compliance in various countries.

US

The main AML regulation in the US is the Bank Secrecy Act. This imposes requirements on regulated entities, such as:

• Establishing comprehensive AML compliance programs,
• Performing ID verification and customer due diligence (CDD)
• Monitoring and reporting suspicious transactions
• Making Currency Transaction Reports (CTRs) for cash transactions over $10,000
• Maintaining detailed records for at least five years
• Having regular, independent testing of the program’s effectiveness

Additional AML regulations in the US include the Patriot Act and the Anti-Money Laundering Act (AMLA) 2020.

EU

The AMLR is the most up-to-date legislation for financial crime in the EU. Key requirements include:

• Carrying out ID verification and CDD
• Establishing transparency about the beneficial ownership of assets
• Reporting suspicious activity
• Retaining records for at least five years from the date a business relationship ends or the last transaction takes place

APAC

AML regulations vary considerably across the Asia-Pacific (APAC) region. In Singapore, the Corruption, Drug Trafficking, and Other Serious Crimes Act 1992 (CDSA) and the Financial Services and Markets Act 2022 are the key regulations for AML, supported by supplementary legislation, such as the Payment Services Act 2019. Obligations for regulated entities under these rules include:

• Identifying and knowing their customers (KYC)
• Identifying beneficial owners of assets
• Conducting regular account reviews to identify signs of financial crime
• Monitoring and reporting any suspicious transactions

For Hong Kong, the key AML legislation is the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), supported by the Banking Ordinance (BO). Requirements of these regulations include:

• Implementing and maintaining a risk-based compliance program
• Carrying out CDD and KYC procedures
• Maintaining ongoing customer monitoring
• Reporting suspicious transactions to authorities
• Keeping detailed records
• Arranging regular independent audits

The enforcement is carried out by SFC and HKMA. 

LATAM

Latin American (LATAM) countries each have their own AML regimes. Brazil’s AML regulations are contained in a number of different laws, including Law No.  9,613/1998 (the ‘AML Law’). Brazil’s AML regulatory requirements include:

• Implementing risk-based internal controls
• Carrying out ID verification and CDD
• Maintaining ongoing transaction monitoring
• Reporting suspicious activity to the authorities within 24 hours
• Keeping detailed records for at least five years

Argentina’s AML rules are also contained within a number of different laws. These include Law 25.246 (AML Law) and Law 26.683 (which established money laundering as a separate criminal offense). Under Argentinian AML rules, regulated entities must take steps, including:

• Taking a risk-based approach to AML
• Appointing an AML compliance officer
• Verifying customer identities and carrying out CDD
• Carrying out transaction monitoring
• Reporting suspicious activities to the authorities
• Maintaining detailed records and keeping these for the required time limit

Guides to AML regulations by country

Here you can find the list of our articles for each country:

• Argentina
• Brazil
• Canada
• Chile
• Colombia
• Germany
• Hungary
• India
• Indonesia
• Lithuania
• Malaysia
• Netherlands
• Philippines
• Saudi Arabia
• Singapore
• South Africa
• Thailand
• UAE
• UK
• USA

How KYC and AML processes work in practice

The following are key AML processes and how they work in practice, including where KYC fits in.

Customer onboarding

Customer onboarding is the process of bringing a new customer into your business. KYC (Know Your Customer) is the regulatory requirement that obliged entities must follow as part of the onboarding process.

KYC involves collecting identifying information from new customers (such as name, address, and date of birth) and verifying that it is genuine. This can be done through document-based methods (e.g., passports, ID cards, driver’s licenses) or non-document-based methods (e.g., trusted databases, bank account checks, or credit bureau data). Once verified, Customer Due Diligence uses this information to determine the customer’s money laundering risk. The overall goal is to onboard genuine customers with minimal friction, while identifying and investigating high-risk individuals who may need to be blocked or reported.

AI is increasingly critical to KYC and customer onboarding. It can automate many parts of the process, including checking ID documents, carrying out liveness checks, and checking government lists for Politically Exposed Persons (PEPs) and sanctioned individuals. Using AI for KYC can make the process faster, more consistent, and more effective while also reducing costs.

Monitoring

Transaction monitoring is the process that allows any signs of suspicious activity by a customer to be spotted. Modern AML tools allow these criteria to be updated and context to be taken into account so that genuine signs of financial crime can be detected without generating excessive false positives. Regulations will provide guidance on what should be considered suspicious activity.

Case management and investigation

When suspicious activity is flagged, a case must be created and assigned to an appropriate person for investigation. They will then carry out the necessary checks to determine whether there is reason to suspect money laundering or other financial crime. If there are signs of financial crime, then a report will need to be made to the relevant authorities.

Reporting

Regulated entities will need to report any suspicious activity they detect in line with the regulations for the relevant country. Each jurisdiction will have its own reporting criteria, including what should trigger a report and deadlines for submission. 

The types of reports and terminology vary between jurisdictions – they include Suspicious Activity Reports (SARs), Suspicious Transaction Reports (STRs), and Suspicious Matter Reports (SMRs).

Oversight

A compliant AML risk framework will have both internal and external oversight to ensure it functions as intended and meets regulatory compliance requirements.

Internally, businesses should have people handling the first line of defense (monitoring, investigating, and reporting on cases) and a second line team responsible for monitoring and oversight (as well as functions such as policy development and education).

Externally, regular independent audits should be carried out to assess how well a financial risk team is meeting regulatory requirements and identifying any areas for improvement.

How automation improves KYC/AML compliance

Businesses can implement either manual (performed by a human compliance team) or automated KYC/AML checks. Automated KYC/AML and sanctions screening solutions reduce the risk of losing applicants by increasing pass rates.

Automated KYC checks

By automating KYC, businesses obtain customer identity data through online identity verification. This process can occur on a mobile or web platform, and usually involves five steps:

1. The user selects their ID document type
2. The user uploads photos of their document
3. The KYC platform screens and validates the document
4. Users upload a photo of themselves holding the document
5. The KYC platform verifies that the user is a real person.

Automated KYC procedures can also include biometric checks. One of them is called liveness, which is a face authentication process that verifies whether the client is a real person.

Automated AML and sanctions screening

Automated KYC and AML screening solutions are beneficial in terms of costs and efficiency. They reduce manual work and protect businesses from crime by getting reliable data from trustworthy sources, such as:

• PEP lists
• Sanctions lists
• Watchlist
• Adverse media lists

With automated AML solutions, businesses can build verification flows according to AML/KYC requirements in a given jurisdiction.

Best practices for effective AML and KYC compliance in banking, crypto, and fintech in 2025 and beyond

Banking, fintech, and crypto markets are the most vulnerable to money laundering and fraud. Effective KYC/AML processes can mitigate this by:

• Lowering legal and reputational risks. By complying with AML laws, businesses can avoid hefty fines and other penalties from regulators while safeguarding their reputation.
• Detecting fraudsters. In financial services, fraudsters not only use fake IDs but apply a variety of sophisticated schemes, for example, money muling. By ensuring that only verified users can become customers, businesses can curb even the most innovative fraud attacks.
• Improving user experience. When businesses optimize their KYC/AML flows according to applicant risk profiles, users don’t have to pass extra checks. This reduces drop-offs and improves the user experience.

Step-by-step guide to AML and KYC compliance best practices

The following are key components of AML compliance, including KYC:

• A risk-based approach. This involves assessing users to determine the risk of money laundering they pose. Additional checks can then be carried out on higher-risk individuals.
• A risk framework tailored to your regulatory requirements. This ensures that your AML risk program meets your regulatory obligations.
• Compliance officers. An AML compliance officer will be responsible for managing your AML program and ensuring regulatory compliance.
• An appropriate risk culture. This defines your organization’s values, beliefs, attitudes, and behaviours towards AML risks. A good risk culture is essential to ensure your framework is followed effectively.
• Regular team training. To ensure every member of your team understands their role in preventing money laundering.
• Keeping policies up to date. Policies must be regularly reviewed to ensure they remain compliant with the latest AML rules.
• KYC. This includes identity verification, customer due diligence (CDD), and enhanced due diligence (EDD) for higher-risk individuals.
• Transaction monitoring. This involves assessing customer transactions to identify any suspicious activity or patterns.
• Effective case management tools. These help to ensure compliance requirements are met, cases are handled consistently, resources are allocated efficiently, reports can be generated quickly, and all information is recorded in one place.
• Identifying and investigating suspicious activity. Any suspicious activity must be caught promptly and investigated thoroughly. Good transaction monitoring and case management are critical here.
• Reporting suspicious activity. Your AML compliance program must take account of reporting requirements, including the different types of reports you must make, the thresholds for making those reports, the information they must contain, and reporting time limits.
• Keeping comprehensive records. Most AML regimes require records to be kept for a certain time period (five years is common).

Independent audits. Your AML compliance program should be regularly reviewed by independent experts so you can verify its effectiveness and any areas that require improvement.

Case study: Bybit

Bybit, a global crypto trading and staking platform, needed to implement an automated KYC solution to fight fraud, stay compliant with AML regulations, and stop fraudsters from passing the onboarding stage.

Sumsub rose to the challenge by adding two levels of verification checks:

1. ID verification and biometric liveness for users who wish to withdraw up to 50 BTC;
2. Proof of address (PoA) verification for those who wish to operate with larger sums.

Since integration, Sumsub has solved Bybit’s previous issues with delayed checks and verification errors:

• Verification time has been reduced to about one minute;
• The average pass rate has reached 78% for first-level verification;
• Forgery attempt detection has risen to 99%.

Learn more about Sumsub and Bybit’s partnership in our article.

Case Study: ANNA 

ANNA, which stands for “Absolutely No-Nonsense Admin”, is a business account and tax app for small businesses.  The company previously used a verification provider that couldn’t verify certain types of documents during the KYC process. On top of that, verification time was longer than expected and pass rates were low. Eventually, the company started working with Sumsub, integrating the following solutions:

• AML Monitoring
• ID Verification
• Liveness/Face Match
• Proof of Address

As a result, manual work was reduced by 95%. Pass rates increased by 88%, while fraud attempts went down by 6%. 

Learn more about Sumsub and ANNA’s partnership in our article

Case study: Kaizen Gaming

Kaizen Gaming is one of the fastest-growing game tech companies globally. Before partnering with Sumsub, the company’s verification procedures were approximately 15% automated, meaning their internal compliance team had to perform 85% of the checks manually. This led to customer drop-offs and an unpleasant user experience. Realizing the issue, Kaizen Gaming needed a more sophisticated (and automated) solution to ensure seamless customer onboarding in compliance with regulatory requirements across markets. 

The company partnered with Sumsub, integrating  the following features:

• Automated Data Extraction
• ID Verification
• Proof of Address 
• Bank Card Verification

As a result, Kaizen Gaming automated its onboarding, increasing overall performance by 350%.

Learn more about Sumsub and Kaizen Gaming partnership in our article.

How Sumsub helps with KYC and AML

Sumsub offers a one-stop shop for all aspects of AML compliance, including KYC. Supporting you through every aspect of regulatory compliance, from onboarding and monitoring to investigation and reporting, we make AML compliance easier, more reliable, and more efficient.

Sumsub’s AML platform allows you to:

• Easily adapt to different regulations in various jurisdictions
• Onboard new users, monitor activity, and manage cases in a single platform
• Secure high pass rates for new users while weeding out high-risk individuals
• Improve efficiency and reduce costs
• Reduce case resolution and reporting time

Manage KYC, AML, and screening cases with built-in workflows, checklists, and instant reporting tools.

FAQ

• What is the difference between KYC and AML?

  AML and KYC are not the same. KYC is just one component of an AML program, which is, therefore, encompassed by AML.

• What is AML & KYC compliance?

  AML compliance is a regulated entity’s conformity to the requirements set by AML regulations. KYC compliance refers to the requirements for the identification and verification of a customer.

• Is KYC part of AML compliance?

  Yes, KYC is a key part of AML compliance. It is a primary part of any AML framework as it allows businesses to verify users’ identities and accurately assess their individual levels of risk. Effective KYC helps businesses prevent people involved in money laundering, identity theft, account takeovers, and other forms of fraud from becoming customers. It also facilitates a risk-based approach to AML compliance that ensures high-risk individuals receive proper scrutiny while making sure resources are not wasted on low-risk individuals, and that genuine users do not face an unnecessarily onerous onboarding process.

• What is an AML policy?

  An AML policy is a series of internal rules and measures for preventing money laundering and terrorist financing.

• What are KYC & AML checks?

  KYC is part of AML. A KYC check verifies that the client is actually who they say they are. An AML check screens customers against sanctions, PEP lists, and watch lists.

• Why are KYC and AML important for businesses?

  For regulated businesses, effective KYC and AML are essential to meet their regulatory compliance obligations. Failure to comply with relevant AML laws can result in severe fines and other penalties. AML breaches can also cause serious harm to a business’s reputation. KYC is also critical for ensuring only legitimate people can become customers of a business, reducing the risk of fraud. Well-optimized KYC and AML processes can protect a business while making it quick and straightforward to onboard genuine users.

• What are the main AML and KYC regulations?

  Each country has its own AML regulations, which typically include provisions for KYC. Some countries share a regulatory framework, for example, EU member states follow the AMLR standard. In general, most major economies follow the Financial Action Task Force (FATF) Recommendations when legislating for their approach to money laundering. Examples of AML regulations include the US’s Bank Secrecy Act, Patriot Act, and Anti-Money Laundering Act (AMLA) 2020.

• How do businesses become KYC/AML compliant?

  Businesses must develop and effectively implement AML compliance programs, which include implementing Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) procedures, risk assessment, AML policies and internal controls, ongoing monitoring, suspicious activity and transaction reporting, and more.

• What is the AML process?

  Typically, it consists of the following checks:

  • AML policies and internal controls
  • AML compliance officer appointment
  • AML training programs for staff
  • Risk assessment
  • KYC and Customer Due Diligence (CDD)
  • Enhanced Due Diligence (EDD), if required
  • Ongoing monitoring
  • Suspicious activity and transaction reports (SARs/STRs)

• How can technology improve AML and KYC processes?

  Technology is essential for modern AML and KYC processes. Good AML and KYC tools offer benefits including automating many key tasks, significantly speeding up the processes involved, ensuring all regulatory requirements are met, facilitating efficient allocation of resources, simplifying record keeping and report generation, improving approval rates for legitimate users, and reducing costs.