All You Need to Know About KYC And AML Compliance

KYC is the process in which a customer’s identity is verified against the identity proofs and documents submitted by them. Banks and Financial Institutions conduct the KYC processes during the customer onboarding process in order to have proper knowledge and understanding about the customers whom they are dealing with. It includes documents with basic information about the customers such as name, address, birth date, photographs, etc.

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Anti-money laundering (AML)

Anti-Money Laundering (AML) is the process that helps financial institutions to fight against financial crimes and money laundering and protect their financial systems from the damage caused by these crimes. AML refers to keeping a check and closely monitoring fraudulent activities such as illegal money transfers, suspicious transactions, and money laundering by unfair means.

The difference between KYC and AML:

KYC is just a basic customer identification and verification process that banks and other financial institutions conduct, in order to understand the customers whom they are indulging with. Thus the intent is to manage risks effectively, in the preliminary stage of the customer onboarding process.

While AML is a very detailed process with consists of:

1. Understanding the proper process of monetary transactions taking place in the financial Institution, improving internal KYC procedures in order to have in-depth knowledge about the customers.

2. Giving accurate guidance to the AML team about the monitoring standards to detect fraudulent activities, making sure that all AML procedures are followed as per the guidelines set by the regulatory authorities.