KYC and AML definitions, the big picture
Blockchain has been around for almost a decade yet most people don’t really know much about it. And some words seem weird or strange, acronym no one understand.
Today, let’s talk about KYC and AML, taht are buzzwords thrown around by compliance departments.
What exactly do they mean? What do they entail? And why should you even care? I’m here to help with answers to these questions and the big picture! Ready ? Let’s go !
What is KYC? 🎫
Cryptocurrencies and the blockchain technology that it is based on are still very new to most people. But as more individuals, companies, and even governments begin to adopt this new type of technology into their daily lives, there are some questions that will have to be addressed. One of the most pressing issues at the forefront of people’s minds when talking about cryptocurrencies is Know Your Customer (KYC).
Know your customer, or KYC, is an identification process of a client’s identity and status within a business. It’s why you might have been asked to provide identification and proof of address to receive a parcel delivery or pre-order any products online. This kind of due diligence process is carried out for financial services companies as part of money laundering prevention measures.
What is AML? 🎟️
AML is a set of regulatory requirements developed to detect and deter money laundering and the financing of terrorist activities. The regulations impose internal controls on businesses so that they are able to establish customer identities, monitor effectively the activities of customers and report suspicious transactions.
To go deeper, computers make it easier to track and trace financial transactions than ever before. But, with great power comes great responsibility, and this is something AML professionals don’t forget. Compliance with the AML laws is something that is vital for most financial organizations. The people who work in compliance are called “AML specialists” or “compliance officers” and their main task is to make sure financial institutions have adequate processes in place to prevent money laundering activities, such as the financing of terrorism.
So what’s the difference? 🤨
To keep it simple, AML and KYC are quite similar. Both terms belong to the bigger block of concepts that are known collectively as compliance . And both functions were created for a reason. Both acronyms are well established in financial sector and by now, probably anyone has heard about them. If you want precisions, here is a schema of the differences from Shuftipro.
Conclusion: we all have a role to play in helping combat money laundering 💭
If we all took a step back, my guess is that the cryptocurrency industry would be larger than it is today. It’s clear money laundering is going to go on no matter what, so perhaps we should make it easier for law enforcement agencies to combat money laundering. And maybe some day, the cryptocurrency industry will be bigger and more decentralized — with more hands in the pot working together to fight this major issue. Who knows ?
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