It is necessary to maintain the integrity and security of financial transactions in the fast-evolving financial landscape. The factors that play a critical role in maintaining this integrity are anti-money laundering (AML) and Know Your Customer (KYC).
What is Anti Money Laundering (AML)?
AML is a series of measures and procedures performed by financial institutions and other regulated entities to detect and prevent financial crimes. AML measures are primarily designed to stop criminals from disguising the origins of their illicit funds and integrating them into the legal financial system via money laundering.
Regulated entities such as banks and other financial institutions are required to follow AML regulations and standards to maintain their organisations’ integrity.
What is KYC?
KYC is another process that financial institutions such as banks use to safeguard against KYC financial crime. The primary objective of KYC is to ensure that these institutions collect adequate information about their customers to assess their risk level, prevent fraud, and comply with regulatory requirements.
Associated factors for Enhanced Security:
Customer due diligence (CDD): Available data, such as publicly available information, is used to determine what risk, if any, a customer might expose the business to.
Enhanced due diligence (EDD): Customers who are identified as high-risk may be subject to EDD, such as searches of credit histories and adverse media checks.
Ongoing monitoring: Risk levels can change, and ongoing monitoring helps to inform risk status by carrying out periodic checks and watching for unusual changes.
Suspicious activity reports (SAR): SARs alert law enforcement to potential instances of financial crime, and are filed by the institutions who discover it.
To learn more, contact an AML software vendor.
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