Explain The Difference Between KYC And AML?by Liz Seyi Digital marketing manager
Explain The Difference Between KYC And AML?
KYC (Know Your Customer) and AML (Anti-Money Laundering) are terms that are frequently interchanged. If you have ever wondered what the difference is between KYC and AML you wouldn’t be alone. These acronyms have very real differences in the financial industry.
So, what do you and your organisation need to know about these terms when on the lookout for AML Solutions Or KYC Software?
AML Is A Framework, And KYC A Process
One way to think of AML is that it refers to the whole framework by which firms seek to avoid money laundering. KYC, meanwhile, is the process of identifying and verifying customers. KYC software and tools are features of the wider AML framework.
It’s common to hear regulated entities talking of their AML regulations, whereas vendors refer more frequently to KYC. Regulated financial institutions and law firms must comply with the most recent AML rules. If they fail to do so, they face serious consequences, as it is a criminal offence to give a wilfully false or negligent statement about money laundering.
The AML regulations require firms to report risk, for example, and to perform certain elements of due diligence. Affected entities must also appoint senior staff to certain designated roles, which gives them responsibility for recording and reporting suspicious activities.
However, The Lines Between The Two Terms Can Sometimes Blur
KYC is a compliance process that only accounts for one part of the broader AML framework. It is therefore not a regulatory framework in its own right. Nonetheless, companies across all manner of sectors use KYC software as a means of detecting fraud, as well as – in many cases – to verify customer viability.
AML and KYC are also often used alongside each other in a financial context. This is where confusion can sometimes arise, not least as both are also risk-based approaches.
The two terms are both associated with such elements as client identification, client acceptance, transaction monitoring and risk management. These vital processes show that, when AML and KYC software are combined, they amount to much more than simply ‘knowing your customer’.
Created on Jan 3rd 2019 23:25. Viewed 252 times.