All You Need to Know About AML & KYC

Securing your business in today’s continuously evolving landscape may introduce many concepts that you are not used to. Without a doubt, AML and KYC are two of the most prevalent terms you will come across. You may already be familiar with these topics but even if you’re not, you will have a solid understanding of these by the end of this post. 

What Is Anti-Money Laundering (AML)?

Criminals have been trying to disguise funds that they illegally obtained as legitimate for a long time, and Anti-Money Laundering is basically the framework that tries to combat these attempts through laws and regulations. 

What is the Purpose of AML?

As we have touched upon in the previous paragraph, the primary purposes of AML are to stop money laundering efforts, improve transparency and trace criminal funds back to their sources. 

What are the Key Features?

There are several features that we can point out when describing AML. Let’s start with Customer Due Diligence, which means verifying customer identity and then assessing the risk profile accordingly. Businesses conduct CDD based on the information like names, addresses and identification documents. Similarly, sanctions/PEP (Politically Exposed Person) screening plays an important role during the onboarding as well, thanks to its preventive approach. This screening basically consists of checking customers against high-risk lists. However, businesses need to maintain their vigilance even after the onboarding through means such as ongoing monitoring. This continuous review of customer behavior proves very helpful if a potential fraud comes up. If a business detects a suspicious activity, then they must report to the relevant authority. Aside from these, businesses must always educate their employees about AML regulations, red flags and relevant matters. 

What Is Know Your Customer (KYC)?

Know Your Customer on the other hand, is rather limited compared to AML. In fact, it falls under AML’s umbrella. It encompasses the verification of the identity of customers and assessment of their risks. 

Purpose

KYC aims to prevent fraud, identify high risk customers and ensure that compliance standards are kept accordingly. 

KYC Process

Most of the time, businesses accept customers according to their CAP (Customer Acceptance Policy) but CIP (Customer Identification Program) makes up the first step of KYC processes. During CIP, businesses collect personal data of customers through ID documents. The second part is CDD (Customer Due Diligence), where institutions verify the identities and assess the risk level of customers. These two may sound overlapping but CDD is a much more detailed process. However, customers may possess highly varying levels of risks, and for these high-risk customers EDD (Enhanced Due Diligence) must be applied, which is an even more detailed process than the CDD. After the onboarding, the watch continues with ongoing monitoring. In this part, businesses track transactions, update risk profiles, flag unusual behavior and file SARs if needed. 

AML vs KYC: Key Differences

By now, the differences between these two should be much clearer but let’s compare them from different angles. As we have mentioned in the description, AML is an umbrella term for KYC. KYC process, which consists of verifying the customer identity, is only one aspect of AML’s aim to prevent illegal transactions.

AML vs. KYC Comparison Table

KYC as a Component of AML Compliance

We can consider KYC as the backbone of AML programs. How can you detect suspicious activity, if you don’t know your customer? Thanks to KYC, businesses can obtain the information needed for all other AML measures. Even if a business used the best monitoring tool in the world, it would still be prone to errors due to lack of accurate customer information. This is due to the fact that transaction monitoring systems often rely on customer profiles from KYC. Let’s summarize this more clearly with an example. A low-risk individual in a stable country transferring a large sum of money is considered normal but a high-risk individual doing the same would raise red flags. Lastly, we should add that an accurate KYC can reduce false positives because this can improve efficiency and reduce wasted time. 

How AML and KYC Work Together

During onboarding, KYC data forms the baseline for AML systems thanks to the documents such as ID, occupation, source of funds and risk levels. This baseline is then used to evaluate whether an action is normal or suspicious. This way, businesses can file accurate SARs and STRs. Also, KYC process ensures the continuous vigilance thanks to the periodic updates. 

What Are AML and KYC Software Solutions?

There are many tools that can help you to save time and remain compliant at the same time. These can assist you efficiently verify identities, documents and addresses. In this section, we must also mention eKYC, which stands for electronic KYC. This allows to realize a fully digital onboarding through mobile apps, OCR and biometrics. Also, PEP & Sanctions Screening during onboarding deserves a mention. Also, on a broader scope, business use tools such as transaction monitoring, SAR/STR reporting and risk scoring/profiling as well. 

Why Use AML/KYC Software?

Where should we start? There are numerous advantages of these software tools. First of all, you can prevent risks before they occur thanks to real-time screening. The next point we are going to mention is especially crucial for bigger businesses. Since they accept a large number of customers at the same time, automated processes can allow them to onboard them without experiencing any bottleneck. Also, whether a compliance team is small or not, a risk-based approach allows them to focus on the highest risks. These software tools may seem costly at first, but in the long run they will save you from even heavier fines in the future. Lastly, they can simplify your regulator audits thanks to automated reporting systems. Let’s give a few examples on bigger institutions who are doubling down on these software tools.  

According to the global financial crime report of Nasdaq, more than %75 of respondents invested more in human power compared to previous year in order to improve financial crime prevention but still, it wasn’t enough to fight financial crime adequately. So, it is expected that demand for AML software will continue to rise with time. 

This rise is also indicated in the 2025 Federal Trade Commission Report. This report revealed that customer losses due to fraud hit $12.5 billion in 2024, which equaled to an increase of 25%. According to Mordor Intelligence, the fraud detection and prevention is expected to grow to 153.91 billion dollars by 2030. 

Even the demand for KYC of non-financial businesses are expected to skyrocket in the next years. This is backed up by the research of Juniper Research. They found that total amount spent ton KYC/KYB systems for non-financial businesses will grow by 140% in the next few years. They mainly attribute this due to the factors such as stricter requirements to protect underage consumers across different industries. (https://www.juniperresearch.com/press/pressreleaseskyc-kyb-spend-by-nonfinancial-businesses-to-reach-22bn/)

Essential Elements of KYC and AML Software

Top AML and KYC Software Providers (2025)

Sanction Scanner is a relatively affordable option for all industries thanks to its real-time API integration, access to regularly updated global sanctions & watchlists and fast integration. 

For larger institutions, ComplyAdvantage may prove to be ideal. Its AI adoption in reducing false positives and scalability are some of its highlights. However, its much higher cost and rather complex implementation may deter some organizations. 

Our third provider is Refinitiv. It is one of the largest and most trusted PEP/sanctions databases in the world. However, similar to ComplyAdvantage, it is expensive and can be too much for smaller fintechs.

This one is for businesses such as digital banks and online marketplaces who privilege fast onboarding. Shufti Pro presents several advantages in fraud prevention and fast verification. However, it has a smaller dataset compared to the previous options. 

The last provider we are going to mention is NameScan, which is a relatively simple solution. Its pay-as-you-go screening makes it an ideal option for small businesses. 

How to Choose the Right AML/KYC Platform

The first thing you should check is whether the platform fits with the relevant jurisdiction compliance rules, since they can vary significantly (e.g. FATF, DinCEM, 6AMLD…). A crypto exchange may need Sanction Scanner, a global bank may find Refinitiv more suitable etc. The next thing you should check is whether the data is up-to-date and comprehensive as you need it to be. How often do they update their lists? Do they cover both local and global regulators? 

You must also look into the platform’s integration capabilities. An API-first design may be easier to implement in your existing systems. Additionally inquire about the customer rules & risk scoring, since a risk-based approach is often more efficient than a generalized approach. Some other metrics that you should not neglect are: scalability & performance, user experience, cost & flexibility and audit & reporting. 

Process of AML & KYC Screening

KYC Checks (Onboarding)

KYC checks mostly belong to the onboarding stage, where the first thing you should do is to verify customer identity through passport/driver’s licence/national ID. Then you should proceed to biometrics part. Here, you can require selfies, liveness detection, fingerprint or face scan to further confirm the identity. This confirmation process should continue with address validation with the help of proof of address such as utility bills, bank statements and geolocation checks. The last important part of KYC consists of validating the source of funds proof through bank statements, income records and business documents. After you complete these steps, you will have a customer risk profile. 

AML Checks (Ongoing)

During AML checks, your aim is to detect if any suspicious behavior arises after onboarding. You can conduct a sanctions list screening against lists of OFAC, UN, EU, HM Treasury, local regulators etc. Some other screening you must perform in order to identify politically exposed persons, are PEP screening and Enhanced Due Diligence (EDD). Aside from these screening processes, you should conduct adverse media checks to see if their name comes up in negative news. You should also apply continuous transaction monitoring in case an unusual pattern comes up. If you happen to spot any unusual activity, you must file SARs to the relevant authorities. 

Who Uses AML and KYC Processes?

You may not be surprised to hear that banks, fintechs (BNPL, Neobanks), crypto service providers (Exchanges, VASPs) and payment service providers need to perform these processes. However, even businesses that are indirectly involved in large transactions are obligated to apply AML and KYC. For example, Insurers, wealth managers, law firms, real estate businesses and DNFBPS (Designated Non-Financial Businesses and Professions)

Regulatory Bodies Behind AML and KYC

The amount of regulatory bodies and their varying expectations certainly do not make it easier for businesses to remain compliant. Let’s mention some of the most important ones in the world. 

Probably the most important regulator we have to mention here is FATF, because it is the one that sets international AML/CFT standards and recommendations. In The U.S., there are two major authorities: FinCEN and SEC. FinCEN implements and enforcers AML laws such as Bank Secrecy Act, while SEC oversees securities firms’ AML compliance. In EU, AMLA and EBA are responsible for AML directives and ensure harmonized compliance throughout the European Union. Whereas in The UK, there are several professional bodies but the most important one is The FCA, who oversees banks, fintechs and other firms. This list can go on with examples like MAS for Singapore, CBUAE/FSRA/DFSA for UAE, etc.

What Are the AML and KYC Compliance Challenges?

One of the most common challenges you will face are the false positives. It is not rare for an innocent customer to be marked as suspicious. This also has negative effects on the business side, such as causing compliance teams to waste both time and resources. You may also have difficulties regarding data silos. When the customer information is spread across different systems, it can be harder for you to build a single customer risk profile. Hence, the gaps in monitoring and weak oversight. 

It is also true that automated systems are not flawless but neither are manual checks. Since teams will heavily rely on spreadsheets, emails and human verification, this will result in a slower onboarding process, thus poor customer experience. You may also think that compliance is expensive, especially if you have a smaller firm. You’re not wrong because hiring analysts, cost of software and operating these teams can eat into margins. However, do not forget that regulatory fines will be heavier, let alone the other repercussions such as reputation harm and loss of trust. 

How to Stay Compliant with AML and KYC Regulations

At this point, we believe you have a better grasp of these processes. Let’s clarify even more about how you can stay ahead of these threats. 

As we have mentioned in the previous section, data silos can be very troublesome. So, store all of the information in one unified platform. Also, you are probably now more aware of the importance of automated real-time screening. This is very important because it allows you to detect risks instantly and reduce any delays. In addition to automated real-time screening, you may use AI tools to monitor transactions. Nowadays, machine learning can go very far regarding the anomaly detection and pattern recognition. Also, it would be very helpful for your business to apply a risk-based approach (RBA). We have already mentioned how crucial it is to focus on high-risk customers, products and geographies, which will save you both time and resources. 

Moreover, you must keep audit-ready logs for regulators. Regarding this subject, you had better check that how long each regulator expects you to keep these reports. For example, one regulator may require logs going back to 5 years, while the others may ask you to keep them for shorter or longer periods. While we’re already talking about the regulator expectations, we should also mention that you must update your policies more often in order to adapt to constantly changing regulations (e.g. FATF, FinCEN, 6AMLD, local laws…). The last point we are about to make is about your staff. It is true that constantly evolving technologies can handle several aspects of your compliance with ease, but your staff still plays a crucial role. So, do not neglect to train your compliance staff regularly so that they can stay sharp against new fraud tactics and regulatory changes. 

How Can Sanction Scanner Help?

Sanction Scanner can help you to mitigate these risks and stay compliant throughout your operations. Let’s delve deeper into what we offer. First of all, we feature 3000 Global Sanctions lists, PEPs Lists and Adverse Media lists which we update every 15 minutes. This way you can stay compliant despite the continuously changing landscape of AML operations. 

Sanction Scanner’s AML Name Scanning Software allows you to perform PEP, sanction, remittance, payment, vessel and aircraft screening. These screenings are also combined with automated daily ongoing monitoring, which will allow you to plan your operations according to your customers. 

On the AML Transaction Monitoring side, Sanction Scanner can monitor your transactions in real-time. If any suspicious activity arises, it can stop the transactions and records the transaction for investigation. You can also set customizable rules in order to reduce false positive alarms and avoid wasting your resources.  Also, we have already mentioned the possible difficulties you may face when implementing these types of software tools. Luckily, Sanction Scanner allows easy integration with API. It can also help you tremendously during customer risk assessment since it features risk scoring based on customer profile, geography, products, channels and other metrics. 

We have only scratched the surface, for more details, feel free to get in touch with us.