If you’re planning to launch a new business, particularly in the financial sector, then it’s vital that you have a thorough understanding of the meaning of AML and KYC. Not only that, but in order to stay on the right side of the law and provide a secure and robust service for your customers, you will also need a solid working knowledge of what processes to follow to ensure the highest levels of safety.
To help you get started, read on for a concise introduction to AML, KYC, and how combining the two practices can help protect your business from money laundering, and other criminal activity.
The highest levels of protection – defined
First things first, let’s explore what AML and KYC actually mean.
AML stands for Anti-Money Laundering and refers to the specific regulations put in place in order to deter money laundering. These regulations particularly apply to financial institutions such as banks and mortgage brokers, which are so often targeted by criminals.
KYC stands for Know Your Customer, and is a crucial part of Anti-Money Laundering procedure, especially in the banking sector. Implementing Know Your Customer processes allows banks and other financial establishments to verify each individual customer’s identity and determine if they really are who they say they are. These checks can help to establish whether or not a person could be any sort of risk to the institution, e.g. by discovering if they have a criminal record. They can also reveal the risk of links to possible terrorist organisations.
By adhering to AML and KYC regulations, banks and other businesses in the financial sector can protect themselves and their customers from illegal activity.
What does AML and KYC compliance involve?
If you are involved in the running of a bank or financial institution – or even an online casino – then you need to be well-versed in the nuts and bolts of AML and KYC procedure, as compliance is legally required.
KYC is the first AML process that you will act out when a new customer approaches your business. Forming a crucial part of customer onboarding, Know Your Customer requires various forms of ID verification to determine if your new customer is who they say they are. These verifications will also determine whether they have any troubling criminal history, or current criminal links, that could put your business at risk.
However, it’s not just customer onboarding that needs to form part of your AML and KYC due diligence. Continuous monitoring is also required, consisting of periodic checks – e.g. every three months – to look out for any changes in your customer’s details and also to flag up any potentially suspicious transactions. You can also use other tools, such as PEP scans and the monitoring of watchlists, to make sure you don’t have any potentially dangerous customers in your client base.
The benefits of AML and KYC
There are some obvious advantages to implementing a robust AML and KYC framework, such as the protection it affords against money laundering and other crimes. However, there is another important benefit – new customers who are taken through your KYC procedure will feel reassured by your levels of security and will gain trust in your business, which will lead to rewarding business-customer relationships going forward.
