The truly flexible KYC solution

Requirements vary in different jurisdictions. However, account owners generally must provide a government-issued ID as proof of identity. Some institutions require two forms of ID, such as a driver’s license, birth certificate, social security card, or passport. In addition to confirming identity, the address must be validated. This can be done with proof of ID or with an accompanying document verifying the address on record.

Confusion often arises regarding the difference between KYC and AML. They do refer to some of the same requirements, but essentially KYC is a subset of all AML requirements. AML refers to all regulatory processes in place to control money laundering, fraud and financial crime. KYC is the risk-based approach to customer identification and verification that forms part of AML requirements.  

Another way to explain the difference between AML (Anti-Money Laundering) and KYC (Know Your Customer) is that AML refers to the framework of legislation and regulation that financial institutions must follow to prevent money laundering. “Know Your Customer” is more specific and relates to verifying a customer’s identity, which is a key part of the overall AML framework. However, these two terms are often used interchangeably.

Customer Due Diligence (CDD) has separate tiers reflecting the level of checks that should be carried out  – Simplified Due Diligence (SDD) and Enhanced Due Diligence (EDD). SDD is used for customers and accounts at low risk of money-laundering involvement and involves simpler identity checks.

EDD is used when a customer is determined to pose a higher risk of money laundering or terrorist financing activity. Extra checks must be carried out to more fully understand activity, including transaction monitoring and checking of sanctions lists.  

In order to certify KYC documents, the person must be authorized to do so by local regulations. Typically, this responsibility rests with financial institutions and government agencies, though in some cases, a knowledgeable third party like IDnow may also be able to provide certification services. Regardless of who is tasked with certifying KYC documents, it is essential that they have the necessary skills and experience to assess the authenticity of those documents accurately. This involves reviewing the individual’s identity information and checking for any signs of forgery or tampering. Only once the document has been certified can businesses feel confident in their ability to comply with AML requirements and fulfill legal obligations when conducting transactions involving individuals or entities from other countries.