KYC Checklist: Template for Your Business

by Tamas Kadar
AML compliance may seem daunting at first. With our AML checklist, it should be much easier to ensure you meet the right regulatory requirements.
An AML checklist helps you go through all the stages needed to protect your business against money launderers. This is an essential read for helping you create your AML toolkit.
This step-by-step process will help you decide what kind of AML fraud prevention & detection features you need to consider and why they’re important.
Before you create your own checklist, make sure you go through our 10-point process below:
Chances are that if you’re on this page, you’ve already been asked to meet AML requirements. But just to recap, here are the key industries where this will be needed:
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There are, broadly speaking, four key types of money laundering techniques:
Identity verification is a cornerstone of AML. Your business should know who it’s dealing with. Basic Know Your Customer verification includes reviewing the customer’s:
That info must be validated with an official document, such as a driving license, national ID, or passport.
And while video verification is increasingly becoming the norm for AML checks in certain industries, such as banking, note that it’s by no means the only technique you can use.
The elephant in the room, when it comes to AML checks, is that fraudsters and criminals probably know how to fool your checks. This can have expensive consequences for your business.
So how can you verify identities if you can’t trust ID documents? A great solution is to look at alternative data.
Put simply, it allows you to learn who you’re dealing with based on public information. That data can come from:
And it’s surprisingly effective. Combining that alternative data with risk scores, you can immediately filter out obvious fraudsters and criminals who attempt to use your business. This helps you save on expensive AML and KYC checks, and gives you more confidence in your compliance.
You can read more about leveraging alternative data for customer due diligence here.
PEP, or Politically Exposed Persons, are individuals in prominent positions. They are considered higher risk than the average person because they may be subject to bribery or corruption. Checking PEP lists is an AML requirement, and there are dozens of online services allowing you to do it.
Sanctions lists are usually lumped together with PEP checks, but you can also find online databases that specialize in that kind of data. These checks help ensure that you aren’t dealing with individuals or companies that have previously been penalized for money laundering.
Anti-money-laundering regulations require that you monitor transactions above a certain threshold. That threshold varies from one market to the next. In the US, it has been lowered to $3,000.
So how does real-time transaction monitoring work? You usually deploy software (in-house or third-party), which analyzes data from every deposit, withdrawal or transaction. If it goes above a set threshold, you can review it, or automatically accept/deny the transaction.
The advantage of real-time transaction monitoring software is that you can customize the thresholds to meet your risk appetite. What’s more, it should be easy enough to change the thresholds when AML rules inevitably change.
Now imagine you could get inside the mind of a money launderer. How do they interact with your business? Do they deposit loads of small amounts to fly under the radar? Do they log in from different, seemingly unconnected geolocations?
These are precisely the kind of questions you can answer by deploying custom risk rules on your site.
Put simply, these rules are the closest thing you can get to behavior analysis, based on data. For instance, you could see if:
The idea, of course, is to preempt money laundering by understanding where the risk lies – going beyond what AML regulations recommend.
A nice and easy step: Your company should have an AML policy statement written and displayed on your website or client communications.
It should explicitly state which checks you perform and for what reasons. This is not only to prepare yourself for legal checks but also to offer your users guidance. If you’re going to add friction to their journey, you can at least explain that it’s a legal requirement.
Looking for an AML policy template? Click here to download an example.
SARs, or Suspicious Activity Reports, are an integral part of your AML strategy.
You need to be prepared to deliver information on people you suspect might be bad agents. That information takes the form of these reports, which are standardized to make it easier for AML compliance agents.
But what about the data itself? Well, it also needs to be recorded. That means you must have systems in place to log client information – while meeting data protection standards.
Here is a great example of a SAR, which will inform you of the kind of data you need to collect.
This step should be straightforward and hopefully, our checklist will be a great primer on how to teach your staff about AML regulations.
Do remember that they tend to change all the time. Sanctions lists and PEP lists need to be updated regularly, and so do thresholds for transaction monitoring.
Ideally, your AML software will keep track of all the regulatory changes, but you can of course check yourself by adding websites such as FINCEN in the US or legislation.gov.uk in the UK.
SEON is a flexible fraud prevention and customer intelligence solution for companies in need of extra intelligence and real-time transaction monitoring.
With modular features that adapt to your AML strategy, we give you complete flexibility in how you verify identities and understand user behavior. SEON offers modular APIs that help address your AML pain points. You’ll be able to:
Our transparent, cancel-anytime pricing model also makes it easy to test the power of SEON to augment your AML checks. Best of all, there’s a 30-free day trial to help you get started with better compliance today. There is also a completely free version of SEON, with a few limitations.
AML requirements are set by governments to ensure businesses do not help money laundering. They include a form of identity verification, PEP and sanctions check, and transaction monitoring.
AML transaction monitoring forces companies to learn as much information as possible about users who make large money transfers. The thresholds are set by national regulators.
An AML policy must be stated on your company website or in communications with customers. See our articles for a complete AML policy template.
A SAR, or Suspicious Activity Report, must be submitted to authorities when you suspect you may be dealing with money laundering. See our article for a downloadable SAR template.
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Tamás Kádár is the Chief Executive Officer and co-founder of SEON. His mission to create a fraud-free world began after he founded the CEE’s first crypto exchange in 2017 and found it under constant attack. The solution he built now reduces fraud for 5,000+ companies worldwide, including global leaders such as KLM, Avis, and Patreon. In his spare time, he’s devouring data visualizations and injuring himself while doing basic DIY around his London pad.
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