KYC AML Guide: the Clock shows the average reeding time of the blog08 min Read


KYC AML Guide: the Clock shows the average reeding time of the blogFebruary 28, 2024

5 Important Facts You Should Know About KYC Regulations

Picture a bank being fined by a regulatory authority over shortcomings in their KYC and AML measures. Not only bank’s overall reputation be jeopardized but it will also face a loss of customer trust in its services. This is all due to deficiencies in the bank’s existing KYC system and non-compliance with the regulatory requirements of AML and CTF. Recently, the Financial Sector has experienced rapid evolution in the regulatory landscape. This blog discusses the important facts you should know about KYC Regulations. We will uniquely discuss each fact from three angles i.e. what you should know as a user, as a business, and as a KYC Solution.

Belal Mahmoud

KYC Product Consultant

What are KYC Regulations?

KYC (Know Your Customer) Regulations are the legal standards set by regulatory bodies to protect the genuine customers of banks, FIs, and other businesses during customer onboarding. These are the guidelines that ensure that the organization implementing KYC Procedures is compliant with the latest regulatory requirements and is protected against fraud, money laundering, and terrorism financing.

Related Searches: Money Laundering Regulations | Bank Secrecy Act | KYC Requirements | EU’s Anti-Money Laundering Directives

5 Facts You Should Know About KYC Regulations

We will explain the 5 facts that everyone should know about KYC regulations and their impact.

Fact 1: KYC Regulations are Changing Rapidly and Regularly

KYC Regulations experience regular updates in different domains. For example, whenever a crime threat arises, KYC Regulation is updated with tighter punishments, fines, and penalties. Similarly, a jurisdiction focusing on reducing the risk of financial crime can update KYC Regulations periodically.

  • Impact on User: Users may be required to change their ways of uploading identifiable data and may be required to follow specific and stringent guidelines while using a fintech service.
  • Impact on Businesses: Businesses may be required to improve their KYC procedures to adhere to the data privacy laws, strengthen the grip against criminals by practicing ongoing monitoring and reporting, and foster seamless and secure services to genuine customers.
  • Impact on KYC Solution: KYC Solutions may be required to upscale their KYC Solutions as per updated KYC regulations, for example, introduce and improve biometric identity verification mechanisms by upgrading the KYC Tool deployed at firms.

Fact 2: Technological Advancements are a Vital Support to KYC Regulations

Since digitization has dominated every industry, emerging technologies like AI, Biometrics, and Deep Learning are also embraced by KYC Regulators. These technologies have helped in achieving higher standards of accuracy and speed in KYC Identity Verification.

Impact on User: Users can now have their KYC done remotely through their smartphones from anywhere and within a matter of minutes. Selfie-based KYC and Facial Biometrics can easily be conducted through smartphones where user uploads identity documents, biometric verification factors, and selfie images.
Impact on Businesses: Businesses can easily collect customer data through advanced biometric readers, KYC Applications, and other associated technologies. It has made it easier for businesses to detect a suspicious person well before time through the eKYC approach.
Impact on KYC Solution: KYC Solutions have achieved considerable benchmarks by integrating advanced technologies in their KYC Tools. KYC Tools are now able to conduct the whole procedure with minimum cost and efficient resource allocation through AI-based identity verification. For example, the newer AI-based Identification employs a risk-based approach to allocate digital resources to verifying a digital identity.

Fact 3: KYC and AML are Often Used Interchangeably Yet There’s a Difference Between Them

KYC (Know Your Customer) and AML (Anti-Money Laundering) are described and discussed as the same thing. In most of the cases, whenever a regulatory update is announced, it is considered for AML. However, regulatory authorities stress that the end goal of both KYC and AML is the same. Yet the 2 procedures have a clear distinction. KYC is done to know who your customers are and AML ensures that no bad actor enters the system.

KYC Regulations are more focused on the Identity Verification part of the KYC procedure. For example, the UK’s Government recently opened consultations on the issue of the use of digital identities in age verification for alcohol sales.

Fact 4: KYC Regulations are a Global Effort

KYC Regulations are not restricted to a specific jurisdiction. Regulating businesses and customers against financial crime is a global effort. However, the scope and risk level of a particular KYC Regulation can be different according to the laws of a country. For example, last year various states in the US passed Age Verification Laws restricting the use of internet to minors with parental consent and other restrictions. The level of strictness of the law was slightly different for each state. Therefore, businesses operating in multiple countries must understand the regulatory requirements of jurisdictions and choose a KYC vendor that is fully compliant with that specific jurisdiction.

Face 5: KYC Regulations are Aimed at Protecting Customers of Fintech Businesses

KYC Regulations require KYC Solutions and Fintech Businesses to develop and implement easy-to-use and secure customer onboarding processes in their businesses. Seamless User Journey helps businesses and KYC Solutions gain customer trust and reach regulatory compliance goals ahead of time. KYC system in its entirety is aimed at protecting genuine customers from getting mixed with criminals and providing them with a secure financial ecosystem.

How Can KYC Vendors Ensure Compliance with KYC Regulations?

KYC Solution Providers should properly analyze their level of compliance with KYC Regulations. To do this, they need to have a sound understanding of KYC Regulatory Compliance Certifications. They also need to stay compliant with AML regulations and fulfill other regulatory requirements listed in our KYC Solution’s Directory under the Compliance Perspective tab for each tested KYC Solution by us.

KYC AML Guide offers a detailed compliance perspective that draws a clear picture of a KYC Solution’s level of compliance. Fintech and other clients can use this list to assess the Solution they want to choose whereas the KYC Vendor itself can optimize its solution to achieve high standards of KYC Compliance.

Do you know that the Top 5 Global KYC Standards are the main contributors to curbing money laundering and upholding regulatory compliance at a global scale? Click the mentioned link and explore more to stay compliant.


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Belal Mahmoud
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Belal possess over 8 years experience in the KYC Identity Verification industry. He has consulted KYC solutions for over 20 new economy companies at DIFC and ADGM while ensuring a seamless technical integration and helped in jurisdictional compliance audits.