AML and KYC are like PB & J
In an ever-evolving financial services landscape, compliance has become a competitive advantageâin addition to regulatory necessity. Many compliance programs focus on KYC and AML. However, while these two elements are often confused, KYC and AML programs function in vastly differentâbut complementaryâmanners. By learning how KYC and AML function together, financial institutions, FinTech companies, and compliance professionals can create more effective systems of risk mitigation.
What is KYC?
KYC is short for Know Your Customer. This is the policy by which financial institutions verify the identity of their customers. The process includes:
KYC is the first step to preventing identity theft, terrorist financing, and the like, through financial crime.
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An AML Program is a more generic term that encompasses the policies and procedures that exist to prevent, detect, and report activity that may seem awry to financial crime. An established AML Program includes:
AML programs are mandatory under international regulations such as the Financial Action Task Force (FATF) standards, EU AML directives, and FinTRAC regulations in Canada.
While KYC is a component of AML compliance, its role is foundational. Here's how they function in tandem:
When properly integrated, KYC and AML programs provide multiple strategic advantages:
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To ensure a seamless and compliant integration of KYC and AML programs, institutions should:
Disconnected systems can lead to fragmented risk profiles. Integrating KYC data with AML platforms is critical.
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KYC and AML programs are two sides of the same coin. When properly aligned, they create a powerful shield against financial crime while ensuring regulatory compliance. Financial institutions, FinTechs, and MSBs must treat these programs not as separate obligations but as complementary pillars of a unified compliance strategy.
Whether youâre launching a new platform, expanding globally, or managing high-risk assets, AML Incubator offers tailored solutions to strengthen both your KYC and AML compliance frameworks.
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