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Read MoreAML (Anti-Money Laundering) and KYC (Know Your Customer) are both regulatory processes used by financial institutions and other organizations to prevent illegal activities like money laundering, fraud, and terrorism financing. While they are closely related, they serve different purposes and are part of broader compliance efforts. Here's how they differ:
Purpose:
AML encompasses a broader set of regulations and procedures to prevent money laundering activities. It is a framework designed to stop criminals from disguising illegally obtained money as legitimate.
Focus:
The focus of AML is on detecting and preventing money laundering activities throughout all areas of the financial system.
Key Components:
KYC:
KYC is a critical part of AML procedures, but AML also includes many other measures.
Suspicious Activity Monitoring: Identifying, reporting, and investigating suspicious transactions that might indicate money laundering.
Regulatory Reporting:
Filing reports such as Suspicious Activity Reports (SARs) with authorities.
Risk Management: Assessing risks across an entire business or financial institution to detect potential laundering threats.
Timing:
AML processes are continuous and must evolve as new threats and techniques for laundering money emerge.
Purpose:
KYC refers to the process of verifying the identity of customers before or during the time they do business with the financial institution or company.
Focus:
It is specifically designed to assess and monitor customer risk.
Key Steps:
Customer Identification: Collecting basic identification details (name, address, date of birth, etc.) and documents (passports, driver’s licenses).
Customer Due Diligence (CDD): Verifying the customer's identity and assessing their potential risk.
Ongoing Monitoring: Monitoring customer activities to detect any unusual transactions.
Timing: KYC usually occurs at the start of the business relationship and continues with ongoing checks, especially if there are changes in customer behavior.
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