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Artificial intelligence is changing the neobanking landscape, with machine learning ready to power up your identity verification process, boost your conversion rate and accelerate your ROI.

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Neobanks increasingly use identity verification (IDV) for the Know Your Customer (KYC) process required by regulators to prevent money laundering.

Neobanks: How AI Can Turbocharge Your KYC Process | Veriff.com

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Neobanks: How AI can turbocharge your KYC process

Enhanced Due Diligence (EDD) is a critical component of the Know Your Customer (KYC) process, designed to address higher-risk clients and scenarios. In this blog, we explore where EDD fits into the broader KYC framework, how it differs from standard Customer Due Diligence (CDD), and why it plays a vital role in protecting your business from financial crime and regulatory risk.

Enhance your AML compliance with our actionable Enhanced Due Diligence Checklist. Learn how Veriff streamlines and secures your EDD process.

Enhanced Due Diligence Checklist | Strengthen Your KYC Process

A blog about enhanced due diligence (EDD) in the KYC process, including where it sits in the KYC process, how it differs from customer due diligence, and why it’s so important.

Enhanced due diligence (EDD) in the KYC process

Explore the Gartner Market Guide for KYC Platforms for Banking

Transform Your KYC Strategy Today

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Enhanced Due Diligence checklist: Strengthen your KYC process with confidence

Rising costs, lengthy onboarding processes, and poor conversion rates are all issues that can arise if KYC processes are not carried out efficiently. 

Thankfully, KYC issues can be simple to overcome when the right processes and structures are put in place. To help you learn more about how to overcome common KYC issues and challenges, we’ve put together this handy guide.

Putting proper KYC processes in place is essential if you’re looking to ensure compliance with anti-money laundering directives.

However, when they’re creating AML and KYC processes, many companies are wasting huge sums of money and countless man hours because their processes are ineffective.

Common challenges faced by firms include:

An inability to spot a change in circumstances

Wasting time and money on false positives

The easiest way to prevent any of these challenges arising is by using a class-leading AML and KYC compliance solution. By enlisting the help of a piece of software such as this, you can automate much of the process and save on man hours. Plus, you can also verify the identity of your customers in as little as six seconds.

By using a dedicated piece of software, not only can you overcome KYC issues, but you can also show regulators that you take financial crime and compliance seriously. On top of this, you can also ensure that you’re only ever asking your customers for the information you actually need, so the process won’t appear burdensome.

Due to the importance of AML policies, a number of AML fundamentals exist that businesses must follow regardless of the jurisdictions they operate in.

These fundamentals work as forms of best practice and should form the basis of a KYC compliance checklist that you follow on a daily basis. These fundamentals include:

As part of your CIP, you must identify your customers and their financial background. This process will also help you monitor their financial activities once they’ve opened an account.  

When onboarding your customers, you must ask them for several key pieces of personal information, including their full name, date of birth, and permanent address. The customer must also provide you with a copy of an identity document, so you can verify this information.

Once you’ve identified your customer, you must then calculate what level of risk this customer poses to your business. Depending on the customer, you can employ one of three levels of CDD. These are:

While customers who pose a low level of risk will be subjected to SDD as part of the onboarding process, those who pose a high level of risk (such as a politically exposed person) will be subjected to EDD processes.

Effective KYC processes don’t stop once a customer has successfully opened an account. Instead, you must monitor your customers on an ongoing basis. This will help you spot whether their risk level has changed or whether their activities are suspicious.

By continually screening your customers, you can keep an eye on their transactions and receive alerts if anything suspicious happens.

Although KYC issues can cause headaches for businesses, it is possible to overcome them with the correct planning and organization. Our top tips for overcoming KYC issues include:

AML regulations and KYC processes can be complex. Many of them also need to be followed to the letter. As a result, to make sure all staff members understand your processes and follow them correctly, you must put written policies in place. This way, all of your policies can be viewed by both staff members and regulators. Within your written policies, you should include information regarding:

What your identification processes include

What regulations you’re currently complying with and how you ensure compliance

Whether your policies have been independently audited

On top of this, you should also employ an experienced AML compliance officer who can guide your AML and KYC efforts.

A compliance officer should help you put your AML program in place, resolve KYC issues, and regularly review compliance.

Overall, the role of an AML compliance officer is to take ownership over the system and ensure that processes are followed and updated. They must also ensure that reports are filed, training is correct, and that the system is running smoothly.

As we mentioned earlier, the way you approach KYC and due diligence should reflect the level of risk that your firm faces. Due to this, you should employ a risk-based approach to customer due diligence (CDD) rather than making each customer face the same checks. This way, you can ensure that your approach to KYC and compliance is appropriate and proportional.

By employing a risk-based approach to CDD, you will receive a number of benefits. For example, you can make sure that you’re meeting your compliance obligations.

However, a risk-based approach to CDD will also help you overcome a number of KYC issues. For example, you can lower costs by only paying for the checks you need. You’ll also improve your conversion rates because customers won’t be subjected to onerous checks. 

Speak with the KYC compliance experts at Veriff

Here at Veriff, our AML and KYC compliance solution can help you show regulators that you take financial crime and compliance seriously. It can also help you comply with regulations and fight financial crime.

If you’re interested in learning more about how you can meet your obligations while making the process as frictionless as possible for your customers, then talk to the KYC compliance experts at Veriff today. 

Putting proper KYC processes in place is essential if you’re looking to ensure compliance with anti-money laundering directives. However, when they’re creating AML and KYC processes, many companies are wasting huge sums of money and countless man hours because their processes are ineffective.

A blog article about KYC issues and challenges, including common challenges for KYC compliance and tips for overcoming KYC issues.

KYC issues and challenges | Veriff.com

A blog about KYC issues and challenges, including common challenges for KYC compliance and tips for overcoming KYC issues.

KYC issues and challenges

As the cryptocurrency industry continues to grow and mature, businesses in the industry have been asked to implement KYC processes similar to those adopted by financial services businesses. 

In this guide, we’ll cover what these crypto KYC processes involve, why they need to be implemented, and the benefits they provide. 

Cryptocurrency transactions between users are generally anonymous and take place in seconds. Due to the speed of the transactions and the anonymity provided, criminals sometimes use cryptocurrencies in an attempt to evade conventional controls relating to money laundering.  

However, global regulators are beginning to pay closer attention to crypto transactions. Now, crypto exchanges and wallet providers are being asked to address the anonymity concerns associated with cryptocurrency transactions by implementing suitable know your customer (KYC) processes.

Crypto KYC is the first step in the anti-money laundering (AML) due diligence process. When a financial institution such as a crypto exchange onboards a new customer, they must use KYC processes in order to identify and verify the customer’s identity. In carrying out the process, they must also assess the customer’s risk profile and the nature of the business relationship.

KYC is now mandatory for most crypto exchanges and crypto wallet providers because they’re defined as MSBs (money service businesses) under federal regulations in the US.

It’s thought that enforcing crypto KYC compliance will help tackle malicious activity adjacent to the crypto space, such as ransomware attacks. At present, attackers are able to leverage the anonymity provided by decentralized cryptocurrencies to evade detection.

On top of this, regulators and industry leaders also hope that the introduction of crypto KYC processes will help improve the crypto sector’s public image. This is because stronger compliance procedures could help crypto shed its perceived association with money laundering and other criminal enterprises.

By its very nature, the crypto industry is prone to problems regarding KYC. After all, the blockchain and decentralized services as a whole have been designed specifically to promote anonymity and to shun central authorities.

Due to this, many crypto firms have no idea who their customers are. Plus, many crypto buyers and traders have traditionally prized their privacy and have no desire to share their personal data with either crypto providers or the government. Instead, they feel that KYC checks are intrusive and unnecessary during the onboarding process.

However, in recent years, regulators have successfully convinced many of the world’s largest crypto firms that the current situation is unacceptable. Faced with the prospect of huge penalties and fines, even the most reluctant crypto firms have been compelled to introduce crypto KYC measures. This is partially because companies who have failed to implement effective crypto KYC safeguards have faced fines in excess of $100 million.

On top of this, the crypto market remains in flux. After all, although reputable crypto firms have now implemented KYC measures, it remains possible for investors to buy crypto without going through KYC processes. However, these exchanges are incredibly risky to use.

Similarly, around the world, crypto KYC measures vary. For example, in the US, FinCEN requires cryptocurrency exchanges to use KYC standards and also practice anti-money laundering measures to achieve regulatory compliance. However, in the EU, standards are not currently as high.

Some experts in the crypto space believe that successfully incorporating KYC into blockchain platforms would be a positive change. This is because using blockchain technology for KYC would provide:

On top of this, blockchain technology could also offer regulators a better understanding of how customers have been onboarded. If all actions by financial institutions are fully recorded and tracked, all activity data will be fully auditable. This information would also help regulators to better understand customer activity.

Plus, by using blockchain technology for crypto KYC, financial institutions will also be able to improve the customer experience by making processes more timely and efficient.

Now crypto businesses are regulated as financial institutions, they must integrate KYC processes into their anti-money laundering programs. In doing so, they must take appropriate steps to:

Collect appropriate personally identifiable information (PII) from the customer

 Acquire a better understanding of the customer’s activities

Determine the probability that the customer poses a money laundering risk

To do this, most crypto exchanges and wallet providers will follow these steps:

Step one: Collect the customer’s PII, including their full name, date of birth, and address

Step two: Compare this information to a government-issued document, such as a passport or driving license. During this step of the process, the business must also verify the authenticity of the government-issued document

Step three: Ask the customer for a selfie. This is then used to verify that the person who is providing the information is the person who is pictured on the government-issued document

Step four: Verify the customer’s identity against official databases that contain information on politically exposed persons (PEP) and sanctioned individuals

In carrying out these steps, crypto businesses can determine the risk of money laundering and financial crime involving virtual currencies for each client. If required, they can then carry out additional due diligence checks. If the customer passes these checks, they can then be allowed to access the service.

However, the crypto KYC process doesn’t end when a customer has been successfully onboarded. This is because the customer must also be monitored on an ongoing basis. This is to ensure that any suspicious transactions can be spotted and, if necessary, reported to authorities.

Although there’s some opposition to KYC in the crypto space, the process actually provides businesses with a number of benefits, including:

Crypto KYC can increase transparency and trust among customers. This is because, when all user identities are verified, customers will feel confident that their crypto exchange is taking proactive and preventive measures to protect their account and their crypto. As a result, they’re more likely to continue using the service because they trust it.

When all identities are verified and crypto exchanges know their customers, the risk of money laundering is vastly reduced. This is because vigorous identity verification processes ensure that each customer is legitimate. This then significantly reduces fraudulent activity and improves market reputation.

Legal obligations in the crypto space are continually changing and evolving. Now, crypto businesses face greater regulatory challenges than ever before.

But, by implementing robust crypto KYC processes now, businesses can stay ahead of the curve. Instead of chasing after new regulations, they can focus on increasing conversion rates, streamlining transactions, and ensuring compliance as international guidelines evolve.

On top of this, by continually staying on top of regulatory changes, businesses can ensure they’re always compliant. In doing so, they can avoid the strict penalties that can be handed down by regulators.

The cryptocurrency market is notoriously volatile. However, much of this volatility is driven by instability and the suspicious nature of some anonymous transactions. By removing anonymity from the process, crypto KYC can bring stability to the market.

Here at Veriff, we make investing in crypto safe and easy. This is because our selfie-based crypto identity verification platform provides industry-leading conversion rates and high levels of fraud prevention.

Our purpose-built solution provides global compliance. With our help, you can satisfy FINRA, SEC, and GDPR requirements, as well as enforce AMLD6 guidelines. Plus, you can verify your customers in as little as six seconds and verify 95% of your customers on the first try.

Our crypto KYC compliance experts are available to help you. If you’d like to learn more about how our crypto identity verification solution can help you meet your crypto KYC obligations, get in touch with the team today. We’d love to provide you with a personalized demo that shows exactly how we can help you meet your goals. 

Crypto KYC is the first step in the anti-money laundering (AML) due diligence process. When a financial institution such as a crypto exchange onboards a new customer, they must use KYC processes in order to identify and verify the customer’s identity. 

Crypto

A blog about crypto KYC and blockchain, including why crypto KYC processes need to be implemented and the benefits they provide. 

Crypto KYC and blockchain

Just as an employer must thoroughly vet a candidate, financial services businesses must also ask questions of prospective customers before they allow them to open an account. This helps mitigate fraud and lower money laundering risks. The process is known as customer due diligence (CDD) – and it should be an essential part of any anti-money laundering (AML) strategy. 

Customer due diligence involves taking steps to identify a customer and verify that they are who they claim to be. Typically, this means a business must gather essential information, such as the customer's name, residential address, and date of birth. The business then requests an official government document, like a driver´s licence, to confirm and validate the identity. Additionally, customer due diligence is about understanding the level of risk a potential customer poses and determining whether this risk aligns with the organization's risk appetite.

Customer due diligence is a foundation of know your customer (KYC) processes and AML strategies. CDD requires companies to understand who their customers are, their financial behavior, and what kind of money laundering or terrorism financing risk they present.

A blog article about anti-money laundering customer due diligence, including the importance of KYC processes and AML strategies.

Anti-Money Laundering Customer Due Diligence | Veriff.com

A blog about anti-money laundering customer due diligence, including the importance of KYC processes and AML strategies, what enhanced due diligence involves, and how to implement a successful due diligence policy.

Anti-money laundering customer due diligence

Don’t compromise

So, how do you become KYC compliant, and why would you need to be? Let us tell you all about it.

In this article, we’ll cover the ins-and-outs of Know Your Customer (KYC) compliance and how to comply with KYC requirements in your organization. As a bonus, you’ll become an expert at identifying some of the endless KYC-related acronyms, like CDD, CTF, CIP, PEP, and PII.

KYC means conducting background checks on customers for pre-onboarding risk assessments. It is done by businesses to identify and verify the identities of clients to meet regulatory compliance. In other words, it ensures that you know your customers. Meeting KYC or Customer Due Diligence (CDD) standards is a cornerstone of modern Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CTF) policies.

Corporate KYC is an expansion of standard KYC regulations. Instead of focusing on verifying individuals, corporate KYC covers a set of procedures to verify businesses. It plays a crucial role in identifying fake companies and as such, corporate KYC regulations are a modern shield against worldwide money laundering. Corporate KYC plays a significant role in fulfilling KYC and AML compliance and it’s also often referred to as KYB (Know Your Business).

On Facebook, you see our “alternative” KYC definition from Veriff’s “identify verification industry glossary”:

Initially, the regulations on KYC procedures only targeted financial institutions. Nowadays, however, KYC is considered a key obligatory procedure not only for financial but also for various non-financial institutions. The complete list of regulated entities that are impacted by KYC requirements varies from one country to another. Typically, the list of regulated entities includes:

Wallet providers and cryptocurrency exchanges

Well-structured KYC processes greatly reduce the risk of fraud. Proper knowledge of KYC requirements and the associated procedures are becoming an increasingly important tool of survival in the complex world of anti-money laundering. But what exactly is the role of KYC in anti-money laundering? Let’s find out.

The term AML refers to different regulations from governments and international organizations. The main purpose of the existing AML regulations, such as the latest Anti-Money Laundering Directive (AMLD5) regulatory framework, is to address the following two types of crimes:

KYC is an essential component in the combating of these kinds of crimes, making KYC compliance an integral process for AML purposes. After all, organizations need to pay attention to who they onboard as a customer, and proper customer risk assessment through a well-functioning KYC process can filter out customers that are linked with money laundering or terrorism.

In short, KYC and AML are two very closely related sets of regulations. And, it’s nearly impossible to have one without the other. This means that if you want your organization to be fully compliant with either KYC or AML, you’ll inevitably have to learn the ins-and-outs of both of them.

The value of KYC was also highlighted during the COVID-19 pandemic. In a survey from the Global Coalition to Fight Financial Crime, 95.5% of respondents believed that due to the pandemic, financial crimes would increase. Any financial crime is closely tied together with AML, and KYC can play a significant role in the prevention of such crime by conducting precautionary measures. Considering all the worrying worldwide statistics of fraud, illicit activity, economic crimes, and money laundering, it’s no wonder why KYC regulations are becoming increasingly important. 

So, what about the actual KYC process itself? What does it look like?

The primary components of the KYC Process

The KYC process includes obtaining and checking Personally Identifiable Information (PII). This phase is referred to as a Customer Identification Program (CIP). CIP is necessary to curb money laundering, counteract terrorist financing, and to combat various other criminal activities that could arise from improper identification of customers.

However, as is often the case with KYC regulations, there’s no one-size-fits-all type of solution to CIP. While CIP provides general instructions, it’s up to each company to decide which PII they choose to request according to their policy.

Some of the more commonly requested examples of PII include:

To verify PII, the clients might need to introduce official documents such as a passport, ID card, driver’s license, or residence permit. However, besides these three examples, various other types of PII can be requested from clients, and the PII verification processes should be adjusted accordingly.

For verification purposes, verifiers may also run PEP (Politically Exposed Person) and Sanctions checks against worldwide watch-lists. Veriff offers both PEP and Sanctions checks as one of its optional services.

In the European Union, KYC process requirements are determined by the AMLD5 framework. According to the AMLD5, obligated entities must ensure that they know who their customers are. In legal policies, this process is referred to as “Customer Due Diligence (CDD)”, and it’s an integral part of financial institutions and other designated non-financial businesses and professions. Read more in our in-depth article on 6 key AMLD5 guidelines to examine the topic in-depth. And, here’s a visual explanation of AML guidelines from the European Commission.

In the United States, on the other hand, CDD requirements are enforced by the Financial Crimes Enforcement Network (FinCEN). FinCEN is authorized by the Bank Secrecy Act (BSA) to impose AML requirements on obligated legal entities and they require all obligated entities to be compliant with four main CDD rules. These rules bolster CDD requirements for financial institutions in the United States, and they apply to entities such as U.S. banks, mutual funds, securities brokers, and futures commission merchants, among others.

Examining both the four CDD rules from the FinCEN and the CDD recommendations from the Financial Action Task Force (FATF) reveals that the two sets of rules are nearly identical. According to them, obligated entities must:

Identify and verify beneficial ownerships

Understand customer relationships and their risk profiles

Continue ongoing monitoring of customers and their transactions

An organization that abides by these sets of rules and recommendations is one step closer to becoming KYC compliant. However, the process of performing CDD is a continuous one, and it varies case-by-case depending on the results of the initial customer risk assessment. That is why there are three different levels of CDD, each meant to be used for different clients depending on their risk levels.

These are the three primary types of CDD procedures

Simplified Due Diligence (SDD) is used in cases where there is a low risk of money laundering or terrorism financing and a full CDD isn’t demanded.

Basic Customer Due Diligence (CDD) covers the basic information that is collected for customer identification and verification.

Enhanced Due Diligence (EDD) includes additional information that is obtained for higher-risk customers. This information is used to better understand customer activity and to mitigate any potential risks of criminal activities.

How much does KYC compliance cost to implement?

According to recent findings, KYC processes cost the average bank $60 million annually. This is because each individual check costs between $10 and $100. 

However, some companies can spend far more than this on KYC compliance. For example, in 2013 alone, JPMorgan added 5,000 employees to their compliance team and spent $1 billion on controls.

But, there’s no reason why KYC compliance needs to cost your business this much money. Here at Veriff, our starter plans cost as little as $1.49 per verification. Plus, you can enjoy a 30-day free trial. Book a consultation today to see exactly how we can help you. Alternatively, start by learning more about us.

If you’re running a regulated entity, then it’s important that you know what a KYC risk profile (also known as a KYC risk scale) is.

Essentially, a KYC risk profile is a calculation of risk. The risk profile is created when a customer relationship is established. It is then used as a baseline for detecting suspicious activities.

Generally speaking, if a client’s risk level is high, they will be consistently and closely monitored. Crucially though, even if the risk rating of a client is low, they will still be monitored, just not as diligently.

Although a KYC risk profile is useful during onboarding, it can also be used to make a prediction of what a client’s risk should look like in the future. This is useful for determining whether something is unusual, out of place, or suspicious. For example, if a client’s transactions suddenly begin to diverge from your predictions, this may indicate suspicious behavior that needs to be investigated further.

Now that you’ve had a chance to glimpse into the abbreviation-rich and oftentimes complicated world of KYC and AML, you might already be pulling your hair out from all these regulations and requirements. While it’s true that becoming legally compliant with all KYC and AML requirements is no easy task, it is a task that can be simplified through the use of online identification services.

In the 21st century, most regulators and organizations already acknowledge the reliability and ease of use of Electronic Know Your Customer (eKYC) and online identification services. This means that all the complicated and time-intensive processes involving personal data, customer identification, and verification can be reduced to a matter of minutes, if not seconds.

Through machine learning, artificial intelligence, and identity experts, Veriff provides organizations with the tools necessary to provide best-in-class online identity verification in seconds. Veriff collects more data points than any other identity verification provider. Many large-scale companies have chosen Veriff as their KYC and fraud prevention service provider. We hope you’ll also consider doing the same if you’re looking for someone reliable to help you achieve KYC compliance without losing your sanity in the process.

Interested in learning more about how our AML and KYC compliance solution can help your business? Then book a free consultation with us today.

Simply give us a few basic details about you and your company, and we’ll provide you with a personalized demo of what Veriff can do for you.

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In this article, we’ll cover the ins-and-outs of Know Your Customer (KYC) compliance and how to comply with KYC requirements in your organization. 

Education

Achieving KYC compliance: here’s why, and here’s how

An entity wanting to provide financial services, in addition to other regulatory requirements, needs to implement an AML and KYC program to protect itself against fraud and increase the level of security against funds being used for illicit activities. Of course, it is mandatory for financial service providers to comply with regulations, and they’re subjected to a range of different regulatory penalties if they fail to do so. That’s why it is essential to have a clear understanding of what anti-money laundering (AML) and know your customer (KYC) mean in real terms, and learn about the key differences between the two.

These terms are commonly used in the same context, but they mean different things. The significant difference between these two terms is that KYC is a specific process which takes place, upon fulfilling certain conditions (e.g. establishing business relationships, conducting an occasional transaction that exceeds certain amount, etc.), whereas AML is a entire set of procedures and processes aimed to combat money laundering and financing of terrorism, which can include KYC. This is the process of obtaining the information about the customer from a reliable and independent source, verifying it, and determining the risks from the establishment of a business relationship with said customer. The KYC process is used to ensure that entities obligated under the AML framework have sufficient knowledge about their customers and certainty about their identity. AML, on the contrary, can be described as an umbrella term for the entire set of regulated mechanisms and procedures that has to be implemented by a variety of financial actors to combat money laundering and financing of terrorism

In this article, we’ll tell you more about both AML and KYC programs, talk in-depth about the key differences, and explain the relevant processes, requirements, guidelines, and tools. 

AML refers to the activities that financial and credit institutions, and companies in other fields, such as gambling providers or lawyers providing specific services, perform to actively monitor clients and prevent financial crimes. The anti-money laundering process helps prevent a wide range of illicit activities such as money laundering or financing of terrorism. Companies, in any case, need to take these measures in order to avoid the potential aftermath of regulatory action taken against them.

The goal is to implement specific regulatory provisions to prevent illicit financial activities by addressing the risk factors inherent to the service, product, or the customer of the company. The AML framework consists of numerous elements - among these are risk assessment of clients, risk management systems, KYC (or customer due diligence) programs, and relevant reporting obligations. It is particularly important for the companies exposed to higher risks of financial crimes to implement an effective anti-money laundering compliance program to avoid facilitating monetary crimes and ensure regulatory compliance. The system should be comprehensive, detailed, regulation-specific, and well-planned. 

We can define KYC as the process of obtaining and verifying a customer’s identity against independent and reliable sources to protect an entity against various risks of financial crime. One of the steps of this process requires potential customers to provide credentials, such as identity documents, to prove that they are who they claim to be. For example, financial institutions may require individuals to verify themselves before opening an account to ascertain their identity. This allows companies to make sure that their services are used only for lawful purposes and to be able to assist relevant authorities throughout an investigation when any issues occur.

Besides preventing crime, KYC processes help banks and other financial service providers understand their customers, improve services, and effectively manage risks. Hence, it is vital for financial institutions to correctly implement such procedures to minimize the chances of aiding any unlawful financial activities. The financial institutions are encouraged to consult different stakeholders, both internal and external, to understand their specific regulatory obligations with regards to the KYC procedures. 

The main objective of the AML framework is to prevent criminals from easily accessing financial systems with the intention of laundering funds or conducting other financial crimes. The overall process aims to implement specific regulatory provisions to prevent illegal activities, mostly related to the financial system, and to avoid the usage of such a system for laundering funds. KYC, on the other hand, is one of the core elements of an AML framework as explained earlier. By obtaining the information about the customer as well as verifying their identity, it aims to prevent criminals from using a specific financial service for their unlawful activities. 

There are various components that help companies adjust their AML and KYC processes to suit their needs. An excessive library of regulations, opinions of supervisory authorities, and guidelines, have been issued by the financial supervisors to help companies to prevent financial crime. Let’s take a look at these components and talk about the major differences between AML and KYC systems in depth. 

In order to understand these processes, it is important to know about the risks associated with Money Laundering. This criminal activity can produce a massive negative impact on society, companies, and individuals. That’s why businesses worldwide must strive for compliance with money laundering prevention practices. 

AML practices put procedures and systems in place that prevent criminals from being able to easily access financial products and services. Upon correct implementation of such systems, it is almost impossible to hide the illicit origins of money within transactions. One of the most important components of the AML system is the KYC process. Companies are obligated to establish their customer’s identities and verify them before providing services or products. 

During client onboarding, AML-obligated companies need to identify and verify the information on their customers to complete the procedure. According to the regulations, companies must take extra steps when the relationship with a customer has numerous higher-risk factors, in order to prevent circumvention of money laundering systems. They should actively monitor their customers’ behaviour with regards to the usage of their services. However, in certain cases, publicly available information may also give grounds for suspicions, and institutions must report suspicious activities when they occur, in accordance with the relevant regulatory requirements. 

The KYC procedure is a mandatory step during this operation. It is essential to identify a client and verify their identity when providing services to them. This obligation helps companies fight fraud and avoid penalties from regulators. Businesses must ensure that they have a proper identity verification system set up, capable of verifying individuals using their ID documents and maintaining a track of high-risk customers to take actions when the need arises. 

Different countries have different AML and KYC regulations for banks, and other credit and financial institutions to be considered compliant. Generally though, these steps are quite similar to each other because they’re based on the same practices. Companies at risk of financial crime are required to implement an anti-money laundering program in order to avoid facilitating monetary crime and ensure compliance with the relevant regulations. The primary goal of these regulations is to detect, and respond to, the risks of money laundering and terrorism financing, thus preventing both.

On the other hand, we can describe KYC compliance as a regulatory obligation to develop customer identification processes, verify the information obtained about the customers on the basis of trust-worthy sources, as well as identifying and addressing the risks related to a particular product and customer. Consistent and effective application of the KYC procedures forms an integral part of the compliance with AML regulations.

There are several tools that help companies be compliant with AML and KYC regulations worldwide. For example, here at Veriff, we offer a full-stack AML and KYC solution. The core components are Identity Verification, checking PEP & Sanctions databases, considering adverse information & media, and ongoing monitoring. 

Using these tools you can ensure that your customers are who they say they are, and fight identity fraud effectively. Our verification engine makes automated decisions in a matter of seconds, which can help companies run their operations smoothly. Veriff also allows developers to deploy the end-to-end compliance technology with a single integration.

Cryptocurrency is a solution for many people worldwide to have cheaper and faster international transactions. Unfortunately, this is not the only reason why people are getting involved in the growing industry. The crypto sector has also enabled criminals to launder money and fund terrorists in an easier way by being a product that strongly favours anonymity. 

Regulatory bodies have been on a quest to address money laundering issues in the crypto industry that would help combat it, while not limiting the digital nature of the service. Previously, only crypto asset exchanges and custodian wallet providers have been subject to relevant anti money laundering regulations, yet in anticipation of upcoming EU-wide AML Regulations, more and more countries are subjecting all crypto-asset service providers to abide by  AML provisions.

Here at Veriff, we want to make it easy for companies to connect with honest people. Take a look at our full-stack AML & KYC Compliance solution that can help you fight financial crime effectively. It’s easy for developers to deploy Veriff’s end-to-end compliance technology with a single integration, backed by industry-leading support and account management. 

What do they mean? And what’s the actual difference? Discover just that in our guide, which looks at what they do, how they work & how they can help you.

What do they mean? And why are they crucial to understand? Discover just that in our guide below, which looks at what they do, how they work & how they can help you.

AML vs KYC - what do they mean & what’s the difference? Discover just that in our guide, which looks at what they do, how they work & how they can help you.

AML vs KYC - What’s the difference? | Veriff

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KYC Learn is your go-to source for deep dives into the world of know-your-customer (KYC) compliance. Our articles provide insights to help your business.

KYC Learn

Latest Resources

Deceptive looks: can machines pinpoint person's age?

Neobanks: How AI can turbocharge your KYC process

Enhanced Due Diligence checklist: Strengthen your KYC process with confidence

KYC issues and challenges

Crypto KYC and blockchain

Anti-money laundering customer due diligence

Achieving KYC compliance: here’s why, and here’s how

AML vs KYC - What’s the difference?

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KYC Learn

Latest Resources

Deceptive looks: can machines pinpoint person's age?

Neobanks: How AI can turbocharge your KYC process

Enhanced Due Diligence checklist: Strengthen your KYC process with confidence

KYC issues and challenges

Crypto KYC and blockchain

Anti-money laundering customer due diligence

Achieving KYC compliance: here’s why, and here’s how

AML vs KYC - What’s the difference?

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