Last updated on August 21st, 2024 at 12:50 pm
How are KYC and AML different and how do they work together?
KYC and AML are both necessary for many companies to comply with governmental regulations. These can be asked of banking institutions, casinos, financial management, and investment trading just to name a few. While they can work in tandem to accomplish similar goals, they are different concepts and require different levels of information.
What are KYC and AML?
KYC, which stands for Know Your Customer, is a process required to verify the identity of customers. KYC regulations continue to change significantly as the digital landscape and fraud tactics rapidly evolve. KYC is commonly required in industries including banking, trading, blockchain, payments, telecom, and financial management. KYC has a wider scope of implementation than AML – KYC processes can help a range of businesses, even those in industries not legally mandated to implement.
AML stands for anti-money laundering. This is a process that prevents criminals from depositing or transferring money that comes from illegal activity such as terrorism and criminal financing. AML processes check for known fraudsters, terrorists, politically exposed persons, and more. This measure is specifically meant to target market manipulation, trade of illegal goods, corruption of funds, and tax evasion. AML checks are commonly required in banking, casinos, currency exchanges, payment and investment industries, real estate, and the insurance industry.
The goals of the two processes are different – KYC ensures businesses verify who each customer is, usually during onboarding, while AML is an ongoing process of monitoring transactions to ensure legality.
How do KYC and AML interact?
AML and KYC processes are often confused, as KYC is a component of AML. KYC is the step in the process that ensures the customer is who they say they are. AML ensures not only this but also involves continuous monitoring of their transactions to ensure legal activity.
While AML is an umbrella term for the range of regulatory processes firms must have in place, KYC is a component of AML that consists of firms verifying their customers’ identity.
How can KYC be integrated into an existing platform?
Verifying and re-verifying identity is an integral part of KYC and maintaining cybersecurity, both in-person and online. Our remote ID validation system efficiently verifies identity, leaving your customers with a streamlined and headache-free experience on your site or app. It’s also easily integrated into current systems to avoid labor hours spent on backend integration and training.
To use our remote KYC software, the customer simply takes 3 images with their smartphone:
- Front of the ID
- Back of the ID
- A selfie
The automation performs mobile ID verification by checking that the ID is formatted correctly on the front and back. It also checks that the information in the barcode matches what is displayed on the front of the ID. It then queries the USPS database to confirm that the address on the ID exists. Lastly, it moves to the pictures, calculating a confidence percentage in facial match between the photo on the ID and the selfie supplied by the customer. The selfie is run through anti-spoofing processes to ensure it is legitimate.
The customer’s picture is first compared to a database of known faces to ensure that a human face is indeed pictured. A complex algorithm then maps the customer’s face and compares the unique layout of the pictured face to the face on the ID provided. The mobile ID verification automation can then see more definitively whether or not the faces match and provides a percentage to represent the confidence it has in the faces being the same. Additionally, our Document Verification System can verify most identification documents including driver’s licenses, passports, passport cards, green cards, and international documents with an MRZ (Machine Readable Zone).
FAQ:
KYC is something that is commonly required in industries including banking, trading, blockchain, payments, telecom, and fund management. AML is commonly required for banks and other financial institutions, casinos, currency exchanges, payment and investment providers, real estate firms, and insurance companies.
The Bank Secrecy Act and FINRA require these in order to prevent illegal activity. If these regulations are not followed an institution can receive fines in the millions and billions.
