BIBA 2025: Inside the action - FullCircl’s key takeaways for a “New Era” of insurance industry growth

In an industry that prides itself on decentralisation, privacy, and user autonomy, the rise of KYC (Know Your Customer) requirements in crypto may seem contradictory. But as the cryptocurrency ecosystem matures, KYC has become a critical foundation for compliance, security, and trust, especially in regulatory-heavy jurisdictions.

This guide will explore what KYC crypto means, why it matters, and how platforms can implement robust KYC systems that satisfy both regulators and users without compromising scalability or innovation.

What Does KYC Mean in the Crypto Industry?

KYC refers to the regulatory requirement for businesses to verify the identities of their customers before offering services. In crypto, this means collecting key identity documents, validating personal information, and conducting AML checks against PEPs, sanctions, and global watchlists to prevent fraud and financial crime.

For cryptocurrency exchanges, custodial wallets, and decentralised finance (DeFi) platforms that operate in regulated jurisdictions, KYC is no longer optional. These businesses must identify users, assess the level of risk they pose, and continuously monitor their behaviour, all while adhering to regional and global compliance frameworks.

The driving force behind these checks is the fight against Anti-Money Laundering (AML) activities. Because cryptocurrencies offer a degree of pseudonymity, they have historically been misused for laundering illicit funds. KYC due diligence helps reduce this risk by tying transactions to verified individuals, allowing regulators and platforms to trace and block suspicious activity.

Why Is KYC Compliance So Critical for Crypto Businesses?

KYC is not just a legal formality, it’s a strategic requirement that protects crypto platforms from reputational damage, financial penalties, and regulatory shutdowns. Without a reliable digital identity verification process in place, businesses expose themselves to exploitation by criminals and create serious vulnerabilities within their operational model.

Implementing KYC also builds trust. Users are more likely to engage with platforms that are transparent about they handle customer data. For institutional investors and banking partners, KYC-compliant platforms signal maturity and reliability, opening doors to partnerships that would otherwise be inaccessible.

Critically, KYC compliance allows crypto firms to demonstrate that they take their regulatory responsibilities seriously. This is essential in a landscape where governments and financial authorities are becoming increasingly proactive in cracking down on non-compliant platforms.

Breaking Down the KYC Process in Crypto

The KYC process within a crypto context involves several stages to effectively verify the identity of customers.

The journey typically begins with identity collection, where users must submit their full name, address, and date of birth. This is then supported by document verification, where official forms of identification, such as passports or driver’s licences, are uploaded and cross-referenced for authenticity.

Many platforms now incorporate biometric verification to combat fraud. Liveness checks confirm that the user is physically present and matches the submitted documentation, to help ensure that identity theft or synthetic identities don’t slip through the cracks.

However, KYC doesn’t end after onboarding. Continuous monitoring is crucial. This involves tracking transactional behaviour for anomalies, re-validating data during user lifecycle events (like account updates), and ensuring customers aren’t added to new sanctions or politically exposed persons (PEP) lists. These processes form part of a risk-based approach, where higher-risk individuals undergo enhanced scrutiny.

Ultimately, effective KYC procedures not only protect the platform but also improve user confidence and contribute to a healthier, more sustainable crypto ecosystem.

Is KYC Mandatory in the UK for Crypto?

Yes. In the UK, KYC is not just good practice, it's the law. Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, firms operating as cryptoasset exchange providers or custodian wallet providers must register with the Financial Conduct Authority (FCA) and meet a robust set of KYC and AML obligations.

These regulations are closely aligned with international standards set by the Financial Action Task Force (FATF) and cover a range of requirements, including customer identity verification, risk assessments, and ongoing due diligence.

The purpose of these laws is to bring crypto services in line with traditional financial institutions, ensuring the sector doesn’t become a blind spot for regulators. For businesses, this means establishing comprehensive policies and systems that not only verify user identity at the point of onboarding, but also maintain accurate records, conduct ongoing risk reviews, and report any suspicious activity.

Who Needs to Implement KYC Under UK Law?

KYC obligations apply to any UK-based business that offers exchange services (such as converting fiat to crypto or vice versa) or acts as a custodian of users’ digital assets. This includes:

• Centralised crypto exchanges
• Custodial wallet providers
• Platforms that facilitate crypto transactions or hold user assets on their behalf

These firms are required to conduct full Customer Due Diligence (CDD), including identity verification, and must be able to demonstrate that their systems can detect and respond to suspicious behaviour. Failure to do so can result in enforcement actions, fines, or even being barred from operating within the UK.

Do All Crypto Wallets Require KYC?

No, but the distinction is critical. Custodial wallets, where a third party manages the private keys on behalf of users are considered financial intermediaries and must implement KYC under UK law. Non-custodial wallets, by contrast, allow users to retain full control over their private keys and are often not subject to the same regulations, at least for now.

However, the regulatory environment is evolving. As policymakers seek to tighten oversight of cryptoassets, even decentralised wallet providers may soon face obligations, especially if they integrate with regulated services or facilitate large volumes of high-risk transactions.

The Risks of Weak KYC Practices

Weak or poorly implemented KYC systems can quickly become a liability. Without clear checks in place, platforms open the door to financial crime, including money laundering, terrorist financing, and fraud. This not only damages a platform’s reputation, but also attracts the attention of regulators and law enforcement.

Beyond criminal risk, poor KYC processes can cause operational bottlenecks. Incomplete or inaccurate data may force compliance teams to revisit user records, delay transactions, or even block legitimate customers, all of which erode trust and lead to user churn.

The cost of non-compliance can be enormous. Enforcement actions from the Financial Conduct Authority (FCA) or other bodies can result in multi-million-pound fines, licence withdrawals, or bans from operating in major markets. For growing crypto businesses, these setbacks can be fatal.

How Is KYC in Crypto Different from Traditional Finance?

At a basic level, KYC in crypto shares similarities with its counterpart in traditional finance: identity checks, document verification, ongoing due diligence. But the context is very different.

Crypto platforms face unique challenges due to the borderless, pseudonymous, and real-time nature of blockchain transactions. Unlike banks, which operate within a defined regulatory perimeter and rely on decades-old customer databases, crypto firms must rapidly assess identity and risk on a global scale, often with limited supporting infrastructure.

In many cases, users can sign up and transact within minutes. That means KYC systems must be fast, accurate, and resilient, without the luxury of long lead times or branch-level checks.

The pressure to balance compliance with user experience is immense. Unlike traditional banks, crypto platforms that introduce too much friction risk losing users to less regulated competitors. That’s why automation and smart data integration have become so essential.

What Makes Scaling KYC So Challenging for Crypto Firms?

As crypto adoption grows, so does the volume of users and the diversity of risks they present. Many crypto platforms experience exponential growth, onboarding thousands of new users each week. Manual processes simply can’t keep up.

Scaling KYC also means dealing with a broader array of jurisdictions, each with different laws, risk tolerances, and data requirements. What works for FCA compliance may not meet the standards of regulators in the EU, US, or Asia.

Additionally, as platforms introduce new services, such as lending, staking, or token issuance, their exposure to regulatory oversight increases. This puts additional pressure on KYC teams to adapt quickly, deploy new tools, and always remain audit ready.

Without the right infrastructure, compliance becomes a bottleneck instead of a business enabler.

Why Automating KYC Drives Efficiency and Compliance

Automation is not a nice-to-have in crypto, it’s a necessity for any growing crypto platform. Automated KYC solutions eliminate repetitive manual tasks and allow compliance teams to focus on higher-risk scenarios where human judgement is essential.

By integrating with identity databases and biometric tools, automated systems can onboard new users in seconds, not days. They also adapt more quickly to changing regulations and reduce the margin for human error.

Perhaps most importantly, automation enables a risk-based approach. Instead of applying a one-size-fits-all policy, platforms can tailor verification intensity based on user behaviour, location, and transaction volume. This results in better resource allocation and significantly lowers compliance costs.

How FullCircl Supports Crypto Firms with Seamless KYC

At FullCircl, we understand the unique challenges that crypto businesses face, from regulatory ambiguity to operational scale. That’s why our KYC solution is designed specifically to help crypto exchanges, DeFi platforms, and fintech innovators stay compliant, agile, and user focused.

Our platform offers real-time onboarding, powered by integrations with global identity and document databases. This means users can be verified quickly and securely, with full audit trails and risk scoring built in.

FullCircl’s solution aligns with both FCA and FATF requirements, ensuring our clients can meet regulatory obligations while remaining adaptable to future regulatory shifts. From sanctions screening to Enhanced Due Diligence (EDD), our system scales with your business.

The return on investment is clear: crypto firms that implement FullCircl experience faster user conversion, fewer compliance delays, and stronger regulator relationships. In a market where trust and speed are everything, we help you deliver both.

The Future of KYC in Crypto Starts Now

As crypto moves into the mainstream, KYC is becoming a baseline expectation, not just from regulators but from users and partners alike. Platforms that invest in strong KYC systems today will not only avoid legal pitfalls, but also build the kind of trust that drives long-term growth.

With FullCircl, crypto firms can meet compliance requirements without compromising on speed or user experience. Whether you're launching a new exchange, scaling your DeFi platform, or expanding into new markets, our KYC solution provides the infrastructure you need to move confidently and compliantly.

Want to see how FullCircl can transform your KYC process? Book a personalised demo today.

As regulatory scrutiny intensifies, organisations must treat Know Your Customer (KYC) and Customer Due Diligence (CDD) as strategic imperatives. This is especially true as global bodies like the Financial Action Task Force (FATF) tighten their recommendations, and countries adopt stricter compliance frameworks to counter money laundering and terrorism financing.

Financial institutions, fintechs, and other regulated entities are now required to adopt more granular, real-time approaches to verifying customer identities, assessing risk, and reporting suspicious activity. From the UK and EU to the US and Asia-Pacific, regulatory reform is accelerating and compliance programmes must evolve in tandem.

What is Customer Due Diligence (CDD) in KYC?

Customer Due Diligence is the process of verifying a customer’s identity, understanding their financial dealings, and assessing the risk profile they represent to your business. It's a core component of any AML (Anti-Money Laundering) framework and a legal requirement in most jurisdictions.

Recent regulatory shifts including the EU’s Sixth Anti-Money Laundering Directive (6AMLD) and updates to FATF’s Recommendation 24 on beneficial ownership transparency have raised the bar for what constitutes “sufficient” due diligence. Firms must now capture more detailed customer data (e.g., source of funds, beneficial ownership, date of birth, etc.) and continuously monitor for risk indicators, particularly in high-risk sectors or regions.

Why is Due Diligence So Important in KYC Compliance?

With regulators imposing stricter penalties for non-compliance, effective due diligence has become critical to avoiding legal, financial, and reputational damage. In 2023 alone, global AML fines totalled over $3.2 billion in banking alone, with regulators cracking down not only on misconduct but also on poor due diligence frameworks.

But due diligence isn’t just about box-ticking. It plays a fundamental role in reducing exposure to terrorist financing, fraud, tax evasion, and Politically Exposed Persons (PEPs) attempting to exploit the financial system. By identifying higher-risk customers early, firms can allocate compliance resources more effectively and avoid unnecessary exposure.

Understanding the KYC Due Diligence Process

The due diligence process typically unfolds in three stages, depending on the customer risk:

1. Standard Due Diligence (SDD): Applied to most customers. Involves collecting basic identifying information and verifying it against trusted sources.
2. Simplified Due Diligence (SDD): Applied where risk is demonstrably low (e.g., listed companies or government entities). Less intrusive checks are permitted.
3. Enhanced Due Diligence (EDD): Required for high-risk clients, such as offshore entities or customers from FATF blacklisted jurisdictions. Involves additional scrutiny, document collection, and ongoing monitoring.

A key regulatory update worth noting is the UK’s Economic Crime and Corporate Transparency Act (2023), which expands requirements for beneficial ownership checks, especially in cross-border transactions. Similarly, FinCEN’s Beneficial Ownership Rule, effective from January 2024, mandates all US companies to disclose ownership data for inclusion in a national registry, a game-changer for CDD workflows.

CDD vs EDD: What's the Difference?

While CDD ensures that firms gather the minimum legally required information, EDD is triggered when that’s not enough. For instance, if a client is a PEP or is transacting in a high-risk jurisdiction, firms must dig deeper to understand the source of wealth, assess the legitimacy of business activities, and continue to monitor transactions over time.

The FATF’s updated guidance on EDD for virtual assets and crypto exchanges (2023) specifically targets these sectors, which are increasingly used in financial crime. Regulated firms must now consider transaction volume, anonymity features, and regional risks when applying EDD to crypto-related clients.

How Due Diligence Requirements Vary by Region

United Kingdom

Under the Money Laundering Regulations (MLRs) and the Economic Crime Act, UK firms must maintain a risk-based approach, conduct regular audits, and file Suspicious Activity Reports (SARs) with the National Crime Agency (NCA) when necessary.

European Union

The upcoming EU Anti-Money Laundering Authority (AMLA), expected to launch in 2025, will centralise AML oversight and standardise due diligence requirements across EU member states. This is in addition to the newly adopted AML Regulation, which imposes uniform rules on KYC processes, beneficial ownership, and digital onboarding.

United States

The Corporate Transparency Act (CTA), enforced by FinCEN, will require US businesses to report ownership information. Financial institutions must also adhere to FinCEN’s CDD Rule, which enforces ongoing monitoring and risk reassessment.

Asia-Pacific

Singapore, Hong Kong, and Australia continue to align with FATF guidance but are introducing local enhancements. For example, Australia’s 2024 AML reform bill expands the scope of reporting entities to include legal professionals, accountants, and real estate agents, all of whom must now conduct KYC due diligence.

Overcoming Common KYC Due Diligence Challenges

The volume and complexity of due diligence checks can quickly overwhelm compliance teams, particularly as regulations shift across jurisdictions. Legacy systems, inconsistent data, and manual verification create delays, increase onboarding friction, and heighten the risk of non-compliance.

Regulatory technology (RegTech) is emerging as a key solution to these challenges. Firms are now turning to tools that offer unified risk profiles, document automation, and real-time screening to make their CDD processes more agile, scalable, and auditable.

How Can Automation Improve KYC Due Diligence?

Automation streamlines due diligence by reducing manual errors and enabling real-time decision-making. APIs, AI, and dynamic workflows can automate tasks like:

• Identity verification (including biometric checks)
• Sanctions and PEP screening
• Risk scoring and classification
• Ongoing monitoring and alerting

With increasing global regulatory requirements, automation isn’t just a competitive edge, it’s becoming a compliance necessity. Platforms like FullCircl help businesses implement smart, scalable KYC and Customer Due Diligence processes that can adapt to changing regulations with ease.

What Should You Look For in a KYC Due Diligence Solution?

To stay compliant across jurisdictions and scale operations efficiently, a due diligence solution should offer:

• Global beneficial ownership data and registry access
• Automated PEP/sanctions screening
• Real-time alerts for transaction anomalies
• Country-specific compliance configuration
• Case management and audit trail functionality

Importantly, the solution must also enable enhanced due diligence workflows and integrate with your existing tech stack to drive operational efficiency.

How FullCircl Supports KYC and Real-Time Due Diligence

FullCircl enables regulated businesses to confidently meet both global and national compliance standards. By combining real-time data enrichment, risk scoring, and automated KYC software, AML screening, and document verification, FullCircl helps organisations:

• Rapidly onboard new customers with reduced friction
• Automatically identify politically exposed persons
• Comply with recent laws like the UK Economic Crime Act or FinCEN’s Beneficial Ownership Rule
• Detect and prevent financial crime with live risk signals

Whether you're verifying corporate structures or assessing customer legitimacy across borders, FullCircl provides the tools you need to stay ahead of evolving regulations.

As global regulations grow tighter and enforcement becomes more aggressive, robust KYC due diligence is non-negotiable. Whether you're a traditional bank or an emerging fintech, your ability to identify and manage customer risk determines not only your compliance, but your reputation and resilience.

By embracing automation, adopting real-time data solutions, and staying informed on the latest global regulatory developments, firms can move beyond reactive compliance toward proactive, efficient due diligence.

Want to learn how FullCircl can help you stay compliant, competitive, and confident in an evolving regulatory world? Speak to a compliance expert today.

Frequently Asked Questions (FAQs)

What is customer due diligence (CDD) in KYC?

CDD is the process of verifying a customer’s identity, assessing their financial activities, and determining the level of risk they present. It's a core part of KYC and helps prevent money laundering and financial crime.

Why is due diligence important in KYC compliance?

Due diligence ensures regulatory compliance, helps identify high-risk customers, and protects firms from legal, financial, and reputational risks associated with illicit activity.

How does due diligence reduce financial crime risk?

By validating customer identity and assessing the source of funds, due diligence helps detect suspicious behaviour and prevent fraud, terrorist financing, and money laundering.

What are the types of due diligence in financial services?

There are typically three: simplified due diligence, standard due diligence, and enhanced due diligence (EDD), applied depending on the customer’s risk profile.

What is the KYC due diligence process?

The process includes identity verification, document collection, risk assessment, PEP/sanctions screening, and ongoing monitoring, tailored based on customer risk.

How can companies automate KYC due diligence?

With the use of RegTech platforms, businesses can automate ID verification, screening, document collection, and risk scoring using APIs and machine learning.

What documents are needed for KYC due diligence?

Common documents include government-issued ID, proof of address, company registration data, beneficial ownership records, and information on the source of funds.

What are common challenges in KYC due diligence for regulated firms?

Challenges include fragmented systems, manual processes, poor data quality, high customer onboarding friction, and keeping up with changing regulatory expectations.

What should I look for in a KYC due diligence solution?

Look for automation, global registry access, configurable risk scoring, EDD capabilities, real-time alerts, and seamless integration with your existing workflows.

How does FullCircl support real-time due diligence checks?

FullCircl provides automated data enrichment, live PEP/sanctions screening, beneficial ownership verification, and ongoing risk alerts to power real-time compliance.

What are the benefits of using APIs for KYC due diligence?

APIs enable seamless integration, real-time data updates, reduced manual entry, and faster onboarding, all while improving auditability and compliance accuracy.

Does FullCircl help with enhanced due diligence requirements?

Yes, FullCircl supports EDD through automated risk flagging, deep data analysis, beneficial ownership checks, and configurable workflows for high-risk customers.

In a market which has experienced huge consolidation and an increasingly burdensome regulatory landscape, the importance of Networks in preserving the vital role of independent brokers across the UK cannot be underestimated.

That’s why I was delighted to chair a fantastic roundtable discussion with senior leaders from across the Network space in collaboration with BIBA. Together, in an open, honest, and insightful forum, we debated how Networks can thrive in a rapidly changing environment. It was great to see a shared commitment to supporting brokers and championing the future of the profession.

Here are our top five takeaways:

1. The growing importance of technology and data

Networks and the brokers they support still face frustration when it comes to data - overwhelming volumes, poor quality, inaccessibility, and lack of data sharing are all challenges.  

A key concern centres on how brokers can embrace modernisation without losing that all-important human touch.

Networks that invest in technology to enhance processes across the entire client lifecycle (from augmenting sales and relationship management to compliance, risk placement, and distribution) and provide data-driven insights to members, are differentiating by maximising the ease of trading and therefore driving growth and competitive advantage.

2. Overcoming regulatory burden and cost

The debate centred on the growing need for Networks to support brokers as they navigate an increasingly complex compliance landscape, in particular the burden and cost associated with Consumer Duty compliance. Whilst it was agreed that regulation is vital, it’s important to invest in good governance in tandem with growth and innovation.

The ability to help broker members automate regulatory compliance, reduce the risk of penalties and ensure they can always cost-efficiently operate within regulatory boundaries can help Networks promote a best practice approach without members incurring significant financial and resource burden. This is especially important when it comes to adherence with Consumer Duty regulations and the increasing focus on customer-centric, outcomes-based products and service.  

3. Driving up broker value

We discussed at length the importance of reinforcing the value of broker advice in a commoditised market. And, how technology can augment the personal touch, not replace it.

Networks can assist by harnessing technology and data in ways that help brokers get closer to the clients – tailoring outreach and aligning value with client needs for a more personalised experience, spotting and addressing gaps in cover or underinsurance issues across their book, delivering meaningful opportunities to connect through the client lifecycle and maximising retention through upsell/cross-sell opportunities.

4. Attracting and retaining independent broking talent

Just like the rest of the industry, brokers face a challenge in attracting and retaining talent.

Networks have a key role to play here, in attracting new talent, as well as driving entrepreneurialism at a time of increased market polarisation.

It’s about supporting the retention of the vital skills and experience that ensure independent brokers maintain their trusted advisor status, investing in helping new start-up businesses get up and running quickly and cost effectively, and offering sustainable routes for those looking to exit the industry with a viable succession strategy in place.

5. Networks have an opportunity to drive the industry forward

But only if they modernise. Networks have never been more relevant, but they must evolve and invest in new ways to maximise the ease of trading for their members.

How can FullCircl help?

We can help Networks maximise the ease of trading for their members, protect independent brokers, and differentiate themselves in an increasingly competitive market.

With FullCircl SmartBroker - either as standalone member benefit or as an integration within Acturis - your members could achieve:

• 80% increase in new business
• 94% faster client onboarding
• 500%-time reduction in policy review processes
• Over 1,000 hours total time savings annually
• 95% renewal retention rate

Get in touch with our specialist insurance industry success team to find out more.

The principal finding of the inaugural report of the CFIT Open Finance Coalition was that substantially more lending could be made to small businesses, and significant increases in lending acceptance rates made possible, with the timely provision of more high-quality, reliable data to lenders.  

It suggested over 25% of SME loan applicants who had been referred for manual underwriting and would potentially have failed to receive an offer of credit, could justifiably be given access to finance.

There are over 5.5 million SMEs in the UK, and around 30% of these have sought finance during the last three years, according to The British Business Bank. This equates to approximately 1.7 million businesses. Shockingly, not only access to funding difficult, but over 50% of SMEs whose applications are declined do not seek alternative lenders.

On the other side, a key struggle for lenders is limited visibility into a customer’s total financial exposure. With over, lenders often lack a complete picture of outstanding debts, affordability, and liquidity - leading to blind spots in risk assessment.

This presents a huge opportunity for traditional banks, credit, and finance institutions, as well as digital challengers and other alternative lending providers who actively invest in innovative funding strategies.

Demand for finance is growing as businesses seek working capital to assist with rising energy costs, supply chain disruptions, the high costs of wages, and the uncertainty of global trade tariffs. As well as for investment ingrowth and development of new products and services.

The CFIT suggests the benefits of better access to data include:

• Better and quicker risk assessments and application decisioning
• Improved customer experience
• Reduction in financial crime
• Increased proportion of creditworthy applications, and therefore improved supply of credit

A single source of truth of lenders

Whilst there is of course an abundance of data avaliable to funding providers, the challenge is having that data orchestrated, augmented, and validated in a way that drives better and faster funding decisions.

With tightening regulations, lenders need to be able to implement faster, data-driven risk assessments to mitigate risk, improve decision-making and strengthen customer relationships.

A single source of truth means the ability to consolidate and harmonise data - i.e. create a unified source of customer intelligence that is up-to-date, accurate, consistent, and reliable. This facilitates informed funding decision making by providing a complete view of a business, its level of indebtedness, affordability and credit risk, as well as insight into the individuals within it.

The best way to achieve this is via a single data orchestration platform. An augmented and validated ‘intelligence everywhere’ approach that delivers a complete view of a business’s financial situation, including the individuals within it. This empowers better funding decisioning at every stage of the lending lifecycle – from acquisition to application, from funding to retention and growth.  

The benefits:

• Task automation, reduction in manual processes, streamlined workflows
• Faster loan processing and approvals smoother, more efficient lending experience
• High loan volumes
• Improved regulatory compliance
• Higher long-term customer value

Best practice examples of data driven lending

Thincats deployed a single platform approach to streamline processes, reduce complexity, accelerate loan completion, and enable faster access to capital for SMEs. As a result, they've achieved a 60% reduction in data entry and manual input time, a saving of 166 minutes per lending journey, along with a better experience for loan applicants.

“The project has delivered significant enhancements to our systems and processes…we have shortened loan completion processes allowing us more time to focus on the deal and improve experience for customers.” Liam Murphy, Head of Change at ThinCats.

Tide sought a new way to balance customer experience with the need to gather and assess as much data and insight on SME customers as possible. Powered by single platform data orchestration, Tide now surfaces actionable insights from multiple data sources – credit scores, Delphi scores, payment data, CCJ history, shareholder data – to qualify applications and assign the right products based on the specific needs of SME customers, whilst limiting lengthy applications processes and delivering a personalised experience.  The result has been a 72% increase in the number of loans it processes annually, and a 10-minute average time saving per application. Application forms are now populated in under 2 minutes.

“By employing a more streamlined data strategy we believe we’ve optimised our capabilities moving forward and can remain the largest credit marketplace in the UK.”  Thomas Boyd, Head of Partnerships at Tide.

FullCircl can help your business lend smarter

We aggregate, enrich and validate data from the widest possible range of sources to deliver a single source of truth for faster and more accurate lending decision making:

• Build more accurate financial profiles of business customers
• Gain a total market view of indebtedness, affordability and credit risks
• Get a clarity of business ownership and group structure
• Stay ahead of regulatory and compliance risks
• Eliminate onboarding friction
• Accelerate loan application processes
• Continuously monitor customers at every stage of the lending lifecycle for enhanced experiences

Talk to us about our SmartBanker, SmartOnboard and how we can help you access all the data and insight you need to take business funding to new level.

Know Your Customer, or KYC, is a critical aspect of compliance, risk management and financial crime prevention for all financial institutions and other regulated businesses.

Operating in an increasingly uncertain global economy, battling ever more sophisticated and tech savvy financial criminals, and feeling the pressure of regulatory scrutiny, strong KYC processes are the frontline of defence for organisations seeking to improve risk mitigation, protect themselves against fraud, corruption and money laundering, and ensure adherence to regulatory obligations.

KYC is also an important aspect of customer experience. Strong KYC checks are key to understanding customer needs, opportunities, and pain points, establishing trust, enhancing experience at every stage of the customer lifecycle, and reducing cost to acquire and serve.

This is your ultimate guide to the what, the why, and the how of KYC.

‍What does KYC mean?

Know You Customer (KYC) refers to the policies and procedures put in place by businesses to manage risk and verify the identities of customers at onboarding stage, and for advanced client lifecycle management – acquire, onboard, originate, monitor retain and grow.

‍Why is KYC important?

Without strong KYC processes, financial institutions and regulated businesses can suffer:

• Increased regulatory and operational complexity, which can result in onboarding times of 100 days
• Escalating risks of financial crime and fraud: UK banks and fintech's alone spend £21.4k per hour fighting financial crime and fraud, pushing the UK's annual compliance bill to £38.3bn (equivalent to GDP of Estonia)
• Inability to meet rising customer expectations: 58% of clients are lost because of slow and complex onboarding
• Fines and penalties: The Financial Conduct Authority (FCA) issued three significant fines to financial institutions for critical compliance failings in 2024 totalling almost $65 million, with total global penalties standing at $4.6 billion.

Importantly, KYC is critical to the delivery of superior client lifecycle management.

KYC processes:

• Build trust by demonstrating a commitment to security and risk management
• Improve customer confidence by mitigating and preventing financial crime
• Allow for more personalised experience through a deep understanding of needs
• Ensure frictionless onboarding for faster time to value
• Help build long terms profitable relationships

Is KYC a legal requirement in the UK?

In the UK, compliance with KYC regulations is monitored by a range of regulatory bodies and government agencies including the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), National Crime Agency (NCA) and HM Revenue and Customs (HMRC).

Key regulations include:

• The Economic Crime and Corporate Transparency Act 2023
• Financial Services and Markets Act 2023
• Proceeds of Crime Act 2002
• The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

The UK regulatory environment for KYC compliance is aligned with the global standards set by the Financial Action Task Force (FATF).

What is required for KYC verification?

In the UK, financial institutions and regulated entities must collect and verify a range of documents on business customers during KYC processes:

• Proof of identity
• Proof of incorporation
• Tax identification
• Proof of address
• Identity and address verification of all stakeholders, shareholders, ultimate beneficial owners (UBO), and persons with significant control
• Bank statements, income tax returns, annual reports

Advanced KYC processes also include:

• Adverse media monitoring
• Politically Exposed Persons (PEPs) and sanctions checks
• Group structure - identification and visualisation of parent and subsidiary
• companies
• Digital identity verification - biometric comparison, optical character recognition
• Electoral roll and mortality checks
• Credit reference data

What are 5 steps of KYC?

1. Customer Identification

Financial and regulated business must ensure that the individuals and entities they are dealing with are who they claim to be.  

For individuals this typically involves the collection and verification of a variety of official documentation (proof of address, photo identification, passport, driving license, employment information), biometric authentication, and database checks.

For entities, the process involves collecting and verifying a range of information and documentation, including company registration documents, business licenses, director information, proof of address, nature of business and ownership structure (ultimate beneficial owners, shareholders); as well as database searches for potential AML red flags such as sanctions and Politically Exposed Persons (PEPS) lists, and adverse media screening.  

2. Customer Due Diligence (CDD)

Financial and regulated businesses must next carry out CDD-related KYC checks to gather and evaluate additional customer information. The aim is to better understand the nature of the customer’s business, potential risks they pose, and potential involvement in illegal activity.

When carrying out CDD measures, organisations must verify the customer identity, identify and verify beneficial owners, understand the ownership and control structures, access and obtain information pursuant to the purpose and nature of the business relationship, and build risk profiles based on an understanding of the nature and purpose of anticipated transactions.

3. Enhanced Due Diligence (EDD)

In addition, for customers considered to be of high-risk, businesses should undertake enhanced due diligence (EDD) - a risk-based approach to investigation and the gathering of more detailed intelligence.  

High-risk customers might include, for example, those subject to economic sanctions or operating in countries without adequate AML controls, customers with complex ultimate beneficial ownership structures, companies managed by politically exposed persons (PEPs), businesses operating in countries with significant levels of corruption, criminal or terrorist activity.  

EDD measures include adverse media screening, obtaining additional identifying information, analysing the source of funds, scrutinising Ultimate Beneficial Ownership (UBO) and transaction screening.

4. Ongoing Monitoring

Customer behaviour changes and risk profiles evolve. Ongoing monitoring, sometimes referred to as Continuous Due Diligence, Ongoing Customer Due Diligence (OCDD) or Perpetual Due Diligence (PDD), includes an in-life customer monitoring approach, based upon risk events and triggers for maintaining KYC checks and monitoring customers for the risks they pose related to AML and other financial crimes.

This involves monitoring and evaluating changes in customer profiles, business activities, ownership and organisation structures, legal status as well as sanctions and PEPs watchlists screening, adverse media screening, payment and transaction monitoring.

5. Reporting and regulatory compliance

Financial and regulated businesses have a duty to report suspicious or nefarious activity uncovered during KYC processes. Organisation must submit a Suspicious Activity Report (SAR) to the National Crime Agency (NCA) if they know, suspect, or have reasonable grounds for knowing or suspecting, that a customer or potential customer is engaged in, or attempting, money laundering or terrorist financing. 

It is important for financial and regulated business to stay ahead of all regulatory changes and update their KYC policies and processes accordingly.

What are the different types of KYC?

KYC can be broadly categorised into traditional or digital processes:

• Traditional KYC is typically highly-manual and time consuming, involving in-person verification of physical documents.
• Digital KYC also known as eKYC, is digitised and automated form of KYC verification, with the capability to verify customers remotely in a faster, more accurate way compared to traditional KYC processes.

What software can help with KYC?

There are a range of software solutions that can help ensure KYC policies and processes are implemented and conducted effectively. These include third-party data providers, identity verification tools, AML screening solutions, data analytics, and so on.

By far the best solution is a single end-to-end KYC compliance platform that streamlines and optimises the entire KYC process, from initial customer interaction to ongoing monitoring, including KYC and KYB checks, AML, IDV and anti-fraud tools.  

A single KYC orchestration platform integrates the various KYC processes into a unified workflow across the five steps, to remove friction for legitimate customers whilst increasing scrutiny for higher-risk businesses and individuals.

This approach avoids the headaches associated with multiple integrations and supplier contracts, saving time and money, improving accuracy, enhancing compliance, and minimising risk.  

Ready to take your KYC efforts to the next level?

FullCircl is an award-winning KYC orchestration solution designed for businesses seeking to verify and authenticate the identity of customers in the most streamlined and accurate way possible.

• Seamlessly integrate KYC checks, AML screening, advance identity verification, fraud prevention, and credit risks screening
• Automate real-time decision-making with unified workflows for the ultimate risk-based approach to KYC
• Improve onboarding speeds and customer lifecycle experiences whilst reducing cost to acquire and serve.

Contact us to book a demo.

Within regulated industries, the terms KYC (Know Your Customer) and AML (Anti-Money Laundering) are often used interchangeably, but they refer to distinct processes with unique purposes.

Understanding the difference between KYC and AML is critical for businesses to ensure compliance, mitigate illicit activity and financial crime, and maintain a positive reputation in the market.

The origins of AML and KYC can be traced back to the establishment of the U.S. Bank Secrecy Act in 1970, and since then have evolved to become a crucial element of account opening, identity verification, and fraud prevention.

Regulated entities, including banks, financial services, crypto exchanges, gambling operators, e-commerce, and more are required to perform KYC and AML on every customer, navigating cross-jurisdictional nuances in regulation and rising customer expectations.

In this article, we explore the definitions, applications, regulations, and difference between KYC and AML, providing a comprehensive overview to those seeking to understand the processes and how to effectively implement them.

What is KYC?

Know Your Customer, or KYC, is a process that regulated businesses need to implement to verify customer identity.

This involves collecting and analysing personally identifiable information such as name, address, date of birth, and identity documents including passport and driving license. KYC checks are conducted at the beginning of the customer lifecycle, during account opening or customer onboarding. However, ongoing monitoring is also essential to detect any suspicious activity or changes in customer behaviour.

The primary goal of KYC is self-explanatory, to receive, verify, and analyse data on customers to ensure they are who they say they are.

In the context of corporate KYC, or Know Your Business (KYB), the primary goal is to analyse financial reports, credit, beneficial owners, and degree of risk by partnering with another business.

By effectively implementing a robust KYC process, regulated businesses can prevent identity theft, fraud, and other financial crimes by gaining an effective overview of each customer.

What is Anti-Money Laundering (AML)

Anti-Money Laundering, or AML, encompasses a broader set of regulations and procedures designed to prevent money laundering and terrorist financing.

AML regulations require regulated businesses to screen individuals and businesses at the point of onboarding, report suspicious activities, monitor transactions, and maintain records to ensure transparency and accountability.

In the context of screening at the point of account opening, onboarding, and point of payment, AML typically involves screening individuals to discover if they are Politically Exposed Persons (PEPs), sanctioned, or possess adverse media.

AML processes are continuous and involve various stages of the customer lifecycle. Regulated businesses must conduct Customer Due Diligence (CDD), Enhanced Due Diligence (EDD) for high-risk customers, and ongoing monitoring to detect and prevent illicit activities. AML compliance is mandatory for all entities involved in financial services.

What is the difference between KYC and AML?

While KYC and AML are often used interchangeable to describe the identity verification and wider financial crime prevention process, KYC serves as a subset as AML.

KYC focuses specifically on verifying a customer’s identity, while AML covers a wider range of activities aimed and preventing money laundering and financial crime.

KYC compliance is the first step of the AML, providing the necessary information for businesses to monitor and assess customer risk.

Once KYC has been successfully performed, AML will then involve screening at the point of onboarding against PEPs, sanctions, adverse media, and watchlists. But the process doesn’t stop there, as customers need to be re-screened to be notified of any changes in risk profile, transactions need to be monitored, and Enhanced Due Diligence (EDD) may be required for higher risk cases.

Understanding not only the differences between KYC and AML but how both processes can work co-operatively leads to numerous benefits, including:

• Integrated compliance: Effectively combining KYC and AML within a compliance framework leads to more efficient data flow, easier analysis, and robust accountability.
• Cross-functional collaboration: In larger organisations, different teams may be responsible for KYC and AML. Understanding the objectives for each and how to split responsibilities leads to more effective collaboration and slick operations.
• Regulatory compliance: As regulation becomes more stringent globally and changes to regulation become more commonplace, understanding how changes impact KYC, AML, or both processes is critical to remaining compliant.

How does KYC and AML implementation differ?

The implementation of KYC and AML can differ significantly depending on the method used by businesses.

For a KYC check to be performed, the business will need access to at least name, address, and date of birth, with the addition of Government approved ID documents to help find a more effective match.

An AML check only requires a name, but it is helpful for the business to also have access to date of birth and address to better narrow down potential matches and reduce false positives.

A KYC check typically used credit information (such as electoral roll, telco, etc.) so plugging into Credit Reference Agency data is a common method. AML on the other hand requires Politically Exposed Persons and Sanctions list, and adverse media so the data sources can vary significantly.

The emergence of data aggregators has become a popular choice for regulated entities as they can plug in to multiple data sources through a single access point, providing access to data required for both KYC and AML.

The responsibility of KYC and AML usually sits with the compliance team, but in bigger organisations they can also be separate responsibilities between MLRO’s, compliance, onboarding, and others, therefore reinforcing the importance of understand the differences.

KYC regulations vs. AML regulations

One of the trickiest parts of navigating KYC and AML is cross-jurisdictional regulation. Whilst all regulation and regulatory bodies have the same goal of preventing financial crime by imposing strict regulation, there are various nuances between regulation that can make compliance difficult for businesses operating in multiple jurisdictions.

Here are some of the most notable regulations:

6th Anti-Money Laundering Directive (6AMLD) – European Union

Effective from 202, 6AMLD increases the number of offences linked to AML and KYC non-compliance, reduces transaction thresholds for fines, and enhances penalties for violations.

Bank Secrecy Act (BSA) – United States

One of the original AML regulations, the BSA was enacted in 1970, requiring financial institutions to maintain records and report suspicious activity to help prevent money laundering.

Patriot Act – United States

Introduced in 2001, the Patriot Act expanded KYC and AML requirements, including Enhanced Due Diligence for foreign accounts and increased cooperation between regulated entities and regulators.

Financial Action Task Force (FATF) Recommendations – Global

FATF sets global standards for AML and counter-terrorist financing (CTF), including guidelines for KYC and processes and Customer Due Diligence (CDD) that local regulators can build regulation from.

Some of the major regulatory bodies include the Financial Conduct Authority (FCA) in the UK, Financial Action Task Force (FATF) globally, Financial Crimes Enforcement Network (FinCEN) in the United States, and the European Banking Authority (EBA) in the European Union.

What are the risks that KYC addresses vs. AML?

As KYC is used to verify the identity of customers, some of the key risks it identifies are:

• Identity theft: KYC processes verify the identity of customers through documents and data, ensuring they are who they claim to be.
• Fraud: By verifying customer information and conducting due diligence, KYC helps detect and prevent fraudulent activities and accounts.
• Operational risks: Effective KYC procedures streamline customer onboarding, improving operational efficiency and providing customers with a slick onboarding experience.

In contrast, some of the risk AML addresses are:

• Money laundering: AML processes identity high-risk individuals, monitor transactions and report suspicious activities, helping to detect and prevent money laundering.
• Terrorist financing: AML regulations require regulated businesses to identity and report transactions that may be linked to terrorist financing.
• Reputational risk: Adhering to AML regulations and identifying bad actors that you shouldn’t be doing business with help protect an organisation’s reputation.

This further strengthens the case to understand the differences between KYC and AML, as both processes help identity different risks posed to businesses but also by having the two processes work harmoniously bolsters compliance efforts.

Are there any technologies that support both KYC and AML?

As demand for secure KYC and AML has grown from regulators and customers alike, the pressure on regulated entities has risen to perform robust KYC and AML as efficiently as possible.

That’s where the emergence of data aggregation platforms and specialist RegTech firms has been established as a key player in the market.

Businesses such as FullCircl provide automated, real-time KYC software and AML solutions to assist regulated businesses in the constant fight against financial crime.

With a data agnostic approach and single access point, regulated businesses can customise the KYC and AML process, ensuring that not only regulatory obligations are met by integrating to leading data sources, but also that customers are given the best possible onboarding journey with real-time checks.

Want to discover more on enhancing your KYC and AML process? Speak to the team today.