KYC and AML – How is KYC used for anti-money-laundering

KYC (Know Your Customer) is a set of procedures that financial institutions and other regulated entities use to verify the identities of their customers. Especially for financial sector, KYC provides important safeguards against fraud and money laundering by ensuring that customers are who they say they are and not engaging in criminal activities.

Financial institutions must adhere to strict AML (Anti Money Laundering) rules when performing KYC checks, including collecting certain information about their customers and verifying that this information is accurate. These checks typically include identifying and verifying the customer’s identity using a government-issued ID or passport, checking for any AML red flags such as suspicious transactions or connections to sanctioned individuals or entities, and obtaining information about the customer’s income and assets.

KYC is an important part of AML compliance, as it helps to ensure that businesses are not unknowingly facilitating criminal activity. By performing proper KYC and AML checks on their customers, businesses can help to protect themselves from financial losses and reputation damage.

KYC and AML automated solutions

There are several different ways that KYC can be used for AML purposes, depending on the specific needs of the business. For example, KYC can be used to help businesses verify the identities of their customers when onboarding them onto their platform or opening new accounts. It can also be used to monitor customer activity for red flags that may indicate money laundering or other criminal activity.

To effectively use KYC for AML purposes, businesses must ensure that their KYC processes are up-to-date and in compliance with all relevant AML regulations. This may involve working with third-party providers to implement automated AML checks and other tools. By properly incorporating KYC and AML procedures into their compliance programs, businesses can help to protect themselves from financial crime.

AML compliance is especially important, as financial institutions are often targeted by criminals looking to launder money or conduct other illegal activities. To prevent this, they must implement robust KYC and AML programs that include specific checks on all customers and transactions.

The need of dealing with a high number of requests in a very short time has created the ground for an automated mechanism for KYC and AML procedures, hence the rise of dedicated software solutions. The idea of a real time validation of a customer is actually one of the reasons financial institutions can become a fintech company, as it reduces friction between the customer and the employees. This leads to a scalable system where sign-up rates and transactions increase while reducing the cost of those actions.

Solutions like the QOOBISS real-time AML/ KYC software helps financial companies comply with the standard domain regulation and also take advantage of reducing the overall cost of those procedures while increasing the user experience in the process. Find out more about the QOOBISS software by setting an online meeting with our team.