What's the difference between KYC & AML?

What's the Difference Between KYC and AML?

In today’s modern world, there are an increased number of threats from criminals looking to commit financial crimes and money laundering schemes. It is therefore essential that safeguarding systems like KYC (Know Your Customer) and AML (Anti-Money Laundering)  are available to businesses to protect them against potential harm. 

In this blog, we’ll explain the difference between AML and KYC and detail how each one is crucial for maintaining compliance and security in the financial sector.

In need of an AML and digital compliance solution? Get in touch with an AML expert today.

What is Anti-Money Laundering (AML)?

AML or anti-money laundering refers to a set of rules, regulations and laws designed to combat and prevent money laundering. 

Every business involved in the finance industry from insurance firms to property companies is required by law to conform to AML regulations. AML measures help to protect a business from the dangers of money laundering but they also act as a deterrent to help prevent individuals from trying to commit financial crimes.

The key components of AML 

Risk Assessment and Management - Identify potential threats of money laundering and implement measures to mitigate these risks.

Monitoring - Monitor customer transactions to identify unusual or suspicious activity. Things like large sums being transferred and rapid movement of funds are just a few examples that will raise concern.

Reporting - If suspicious activity has been identified, the company must report this to the correct authorities. This often involves filing in Suspicious Activity Reports (SARs) or Currency Transaction Reports (CTRs).

Training -  All staff must be trained on AML procedures so they can accurately identify and flag suspicious activity and stay on top of AML regulation changes. 

Recording - Detailed and up-to-date records of all transactions and customer information must be kept so that businesses can trace transactions and perform audits.

SmartSearch offers an extensive AML system with a range of features so you can accurately verify customer details in seconds.

What is KYC? 

Know Your Customer or KYC is the process used by businesses and financial companies to verify the identity of a customer. The main purpose of KYC is to prevent a business from being used for money laundering or criminal activity. 

The core difference between KYC and AML is that AML refers to the anti-money laundering process as a whole, whereas Know Your Customer is one of the many measures established within the AML process.

The main components of the KYC process include: 

Customer Identification Program - CIP is the initial stage of collecting and verifying the customer’s information including name, date of birth, address, and ID. Official IDs like passports and national insurance numbers are checked using dedicated verification systems. 

Customer Due Diligence - Once the customer's identity is verified a risk assessment must be carried out. This process involves evaluating a customer's background, business and expected transactions.

Perpetual Know Your Customer (pKYC) - This is a more in-depth KYC assessment and is great for situations where further information is needed. With pKYC, you can delve further and assess the source of a company's funds and monitor their transactions in detail. 

What Happens during the KYC Process?

At SmartSearch, we have a unique three-step process known as TripleCheck that provides an in-depth customer assessment. 

1. Identification, verification, and screening

This is the first step that uses advanced AI systems to check customer details including name, address and date of birth. The system performs a range of checks including a PEP and sanction screening and can verify a person's identity in seconds. Each check produces AML certification to prove authenticity.

2. Facial recognition

The second stage uses facial recognition technology to authenticate photo IDs. Customers are asked to provide a Selfie Liveness Video (SLV) and biometric facial recognition is used to compare the provided ID to the real person and check if there is a match to the given documentation.

3. Digital fraud checks

The final step involves assessing a customer's full information and generating an overall risk score. If the process has identified a higher risk of fraud, the system will provide further information on more detailed checks that should be carried out.

Our SmartSearch AML and digital compliance platform lets you carry out quick and easy checks that remove the hassle of manual identity verification. If you want to see how straightforward our software can make your AML checks, register for a free demo today.

What Are the Main Differences between KYC and AML Checks?

As mentioned before, KYC is a process within AML so there are some differences between the two. We’ve summarised the key points of AML and KYC down below:

Aim 

The main purpose of AML is to prevent money laundering and deter individuals from committing financial crimes. 

The main purpose of KYC is to use software to verify the identity of customers and screen their financial transactions for any red flags. 

Process

The process of AML involves following the legal requirements for identity checks, assessing the risk of money laundering and creating plans to detect suspicious transactions.

The process of KYC involves the collection of personal identification data including name, DOB, address and ID documents which are then used for identity verification.

Main Features

AML assesses risks and keeps accurate customer financial records. Reviews and identifies threats and updates processes to combat them. 

The main feature of KYC is a range of software that carries out customer identification and due diligence to comply with AML requirements.

First-class AML and KYC with SmartSearch

At SmartSearch, we offer an award-winning AML and digital compliance solution that can verify the identity of customers across the world in over 40 countries alongside monitoring and PEP screening individuals.

Our experts can tailor a bespoke AML platform to any client, whatever your needs. Take the right steps to protect your business from money laundering by booking an exclusive demo of SmartSearch’s award-winning platform or alternatively get in touch via 0113 537 4042 or info@smartsearch.com.