In the Fintech industry, the terms AML and KYC are often thrown around frequently and used interchangeably. While these two terms might sound pretty similar, they refer to different requirements that need to be implemented in order to protect a firm from funds that are used for illegal activities.
As it is mandatory for all businesses providing financial services to implement adequate AML and KYC protocols, failure to comply with the requirements satisfactorily might lead to severe consequences.
For example, in 2020, for a failure to comply with the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) requirements, the Monetary Authority of Singapore (MAS) penalised a business with a fine of more than S$1 million. As such, in order to prevent such a thing from happening, it is essential for business to understand what AML and KYC mean in practice and learn the differences between them.
What is KYC?
Know Your Customer (KYC) is simply the process a business takes in order to obtain and verify a customer’s identity. Often conducted as part of the onboarding process, KYC protocols require new customers to furnish their identity documents in order to prove that they are who they claim to be.
On the other side, businesses will have to verify the customer’s identity against a reliable source and conduct Customer Due Diligence (CDD) in order to build a risk profile for the customer. Through these steps, businesses will be able to better understand the customer (so that better service can be provided) while minimising the chances that the business is aiding any illicit financial activities.
What is AML?
Anti Money Laundering refers to a set of procedures and protocols put in place in order to prevent possible money laundering through the business.
With this goal of detecting and responding to the possibility of financial criminals attempting to disguise illegally obtained funds, AML includes an entire framework of protocols that work together and often includes KYC as one of the elements.
This means that while KYC is a single step procedure that often happens during the customer onboarding process, AML is a cohesive and detailed system that is performed continuously in order to monitor business transactions and ensure that there are no financial crimes happening.
How We Can Help
Here at Regtank, we recognise the importance of adhering to all the AML regulations put into place in order to prevent financial crimes. And to prevent non-compliance, why not check out how the Regtank Compliance Solution can help you and your business prepare robust AML and KYC protocols effectively and easily.
Contact us at firstname.lastname@example.org for a demo today!