What Financial Services Need to Know About KYC and AML

To be fully compliant with regulatory guidelines, companies in the financial services sector should get acquainted with the most essential AML and KYC principles. Since compliance is not optional, you should pay attention to this if you’re a:

• Bank
• Casino
• Private lender
• Insurance broker
• Credit union
• Investment company
• etc.

In today’s brief guide, we’ll talk about essential industry terms and let you in on the most important steps you need to take to ensure compliance. 

About Anti-Money Laundering (AML)

It’s estimated that roughly $300bn is laundered every year by criminals in the US alone. To take a stand against financial crimes such as tax evasion, money laundering, funding terrorism, and similar, financial institutions must double-check their customers’ identities as well as monitor their account activity. In case anything is off, they are required to let the relevant authorities know.

About Know Your Customer (KYC)

The primary aim of KYC is to verify a customer’s identity to rule out fraud during customer onboarding. Ever since the US Patriot Act came to be in 2001, the financial sector has been put under an increased amount of pressure to mitigate the risk involved and stop financial crime in its tracks. The methodology focuses on double-checking personally identifiable information (or PII for short) which typically involves their full name, date of birth, address and so forth.

The problem of compliance

Since the law is clear on what financial services providers are required to do, what’s the problem? For starters, AML and KYC compliance is not exactly cheap. On top of it all, the process involves forwarding sensitive customer data to third-party providers in order to have it verified, potentially leaving it vulnerable to interception by bad actors.

Non-compliance can be a costly decision

If you think compliance can cost a pretty penny, non-compliance can bring a financial services provider to its knees (the fines can go upwards of millions of dollars). And that’s not even considering the irreparable damage your brand will face if you betray your customers’ trust.

Staying on top of crime

To sneak under the radar, criminals are coming up with clever tricks on how to circumvent these preventative measures. Since it’s now easier than ever to spoof a document or misrepresent one’s identity using a stolen personally identifiable document, financial institutions have a hard time staying on top of crime.

Automated KYC solutions are the answer

Your costs can go through the roof if you were to hire a KYC provider. Plus, a human day only has 24 hours in it, so this wouldn’t even necessarily solve your problem if your customer count is increasing rapidly and you need to approve new accounts with as little delay as possible.

Therefore, you should strongly consider investing in a high-grade technological solution that is capable of identifying the fraudsters on auto-pilot without introducing a bottleneck in your operational efficiency or jeopardizing the safety of sensitive personal data your customers have entrusted you with.

To conclude 

Since the penalty for non-compliance is no joke, financial services providers should treat AML and KYC principles with the seriousness they deserve. Thankfully, modern technology can efficiently automate the process without introducing unnecessary risks, so consider integrating it if you don’t fancy the idea of outsourcing the job to a manual third-party KYC services provider.