KYC and AML procedures – how to ensure compliance with international standards

KYC and AML procedures are mandatory measures for financial institutions around the world. They help prevent fraud, terrorist financing and other illegal activities.

Why KYC and AML?

Reputation Protection: Demonstrating a commitment to high standards of business conduct.
Risk mitigation: Minimizing losses from financial crime.
Legal compliance: Compliance with international and national requirements.

KYC and AML Core Principles:

Customer Identification: Collecting accurate information about each customer.
Risk assessment: Determining the level of threat for each transaction.
Monitoring and reporting: Continuous monitoring of suspicious activities and timely notification of the regulator.

International Standards:

FATF: Sets global KYC and AML requirements.
Basel Committee: Develops recommendations for the banking sector.
IOSCO: Defines standards for the securities market.

Examples of KYC procedures

For individuals:

Verification of identity documents (passport, driver’s license).
Confirmation of residential address (bank statement, utility bills).
Collection of information on sources of income.

For legal entities:

Verification of constituent documents.
Identification of beneficial owners.
Analysis of ownership structure.

Examples of AML procedures

Monitoring large transactions: Tracking transactions that exceed certain thresholds.
Analyzing unusual transactions: Identifying transactions that do not fit the customer’s profile.
Checking for sanctions lists: Reconciling customer data with international sanctions lists.

KYC and AML Challenges

Constantly changing legislation: Need to adapt to new regulatory requirements.
Increasing data volume: Complexity of processing large volumes of customer information.
Emerging technologies: Use of artificial intelligence and blockchain to make processes more efficient.
Increased data protection requirements: Ensuring the privacy of customers’ personal information.

How can financial institutions improve their KYC and AML programs?

Technology adoption: Use automated systems to verify data and analyze transactions.
Employee training: Enhance the skills of staff responsible for KYC and AML compliance.
Building a culture of compliance: Creating a compliance-oriented atmosphere in the organization.
Continuous monitoring and improvement: Regularly assessing the effectiveness of programs and making necessary changes.