AML and KYC checks
AML and KYC checks are regulatory processes used by organizations to prevent money laundering and verify the identity of their customers. AML stands for Anti-Money Laundering, while KYC stands for Know Your Customer. These checks are required by EU laws such as AMLD (including AML5), GDPR, and are often integrated with digital identity systems and trust services under eIDAS for secure, compliant customer onboarding.
How do AML and KYC checks work?
AML (Anti-Money Laundering) and KYC (Know Your Customer) are two key regulatory pillars for combating financial crime and ensuring the integrity of the global financial system. AML regulations require businesses, especially those in the financial, legal, and real estate sectors, to detect and prevent illegal activities such as money laundering, terrorist financing, and fraud. KYC is a component of AML and refers to the process of verifying the identity of clients before establishing or maintaining a business relationship.
In practice, AML KYC checks involve collecting and verifying personal information, performing ID document checks, conducting digital identity verification, screening against sanctions and politically exposed person (PEP) lists, and assessing the customer’s risk profile. With the advancement of digital onboarding and trust services, many of these steps can now be performed remotely and automatically, leveraging solutions that comply with eIDAS, GDPR, and AML5.
These checks are not just regulatory obligations—they are critical to building trust between businesses and their customers. They ensure that companies operate transparently and responsibly, while also helping to protect users from identity theft, fraud, and misuse of their personal data.
Key characteristics
- Required under EU laws such as AML5, GDPR, and eIDAS
- Focus on preventing money laundering, terrorism financing, and financial fraud
- Involve identity verification, risk assessment, and continuous monitoring
- Often include PEP screening, sanctions list checks, and adverse media scanning
- Integrated into digital onboarding workflows and customer lifecycle management
- Support remote, automated checks through trusted providers
- Critical for regulated industries such as banking, insurance, fintech, and real estate
Examples
- A digital bank conducts AML KYC checks before activating a new customer’s account using remote ID verification
- A cryptocurrency exchange screens users against international sanctions and PEP lists before allowing them to trade
- A law firm verifies the identity of a new client and assesses the source of funds to meet anti-money laundering requirements
- A fintech startup integrates an eIDAS-compliant onboarding platform that performs automatic KYC checks with biometric verification
- An insurer uses digital tools to validate documents and monitor transactions for suspicious activity in real time
Related terms
- Electronic identification
- Digital onboarding
- eIDAS
- Qualified Trust Service Provider (QTSP)
- Electronic identification
References