Customer Onboarding Process Under KYC and AML Requirements

Financial institutions have to comply with various AML, CFT and KYC regulations in customer onboarding processes. According to the regulations, financial institutions have to control their new customers. These controls should be performed to comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. Financial institutions are responsible for meeting AML, KYC and CDD requirements. Also, financial institutions that do not take the necessary measures to lose their reputation.


Why Customer Onboarding is required for AML Compliance?


There are regulators with local and global authority established to ensure the stability of financial systems and to prevent financial crimes. Various financial crimes are committed every year in the world. Global money laundering transactions estimated at %5 of global GDP. Each year, a global bribe of $ 1 trillion is given. It is estimated that the amount of corruption in the world is $ 2.6 trillion. Also, terrorist funding increases the number of terrorist activities in the world.


Most of these financial crimes occur through financial systems. Gaps in financial systems and the failure of financial institutions to take various measures cause financial crimes to occur. In addition, the stability of the economy is also damaged as a result of financial crimes. Those who money launderer clear themselves by turning legal proceeds from illegal proceedings. Regulators aim to prevent financial crimes by regulations and laws. Regulations require you to first check your customers during the onboarding process and then follow their financial transactions. Companies that meet these requirements will ensure AML and KYC compliance. Financial institutions are fined by regulators if they do not meet their AML requirements.


What are the KYC and AML Regulations for the Customer Onboarding Process?


Companies must meet the KYC requirements of customer onboarding processes. Compliance processes are performed by the compliance officers of the companies. They receive support from compliance programs in compliance processes. The first step of knowing your client (KYC) is to verify the identity of the customer. Customer identification is the most important process of client onboarding. If the customer is not authenticated, the customer's other information may be inaccurate. In this case, the KYC process was mismanaged. If this customer is guilty, financial institutions will face penalties.


Get to know Know Your Customer more closely.


After this stage, the company starts to investigate the customer's history. The customer's previous financial transactions are reviewed. Any suspicious transactions of the past period are investigated. If there is a criminal transaction in the past transactions of the customer, the company will want to take precautions against this. No firm would want the financial institution to be a client of a guilty person. These clients are dangerous for companies. Also, With the support of Sanction Screening Services, compliance officier control their customers in various sanctions, PEP, terrorists and wanted lists.


At another stage, the Customer Due Diligence is performed according to the reports in the previous controls. The compliance officer determines the risk level of the customer according to the customer's information. Considerations when determining the Customer Risk Level:

  • Accuracy of the documents submitted by the customer to the company.
  • Business industry in which the customer works.
  • Sanction and Politically Exposed Person screening
  • Past financial transactions history


If identified as a high-risk customer, the Enhanced Due Diligence process is applied to the customer. If there is no suspicious situation in the controls made up to this stage, the customer's account is opened.

Financial institutions implementing these processes are considered to have fulfilled AML and KYC obligations. But AML and KYC are not just these obligations. Companies should continue to carry out these checks at regular intervals to their customers. According to AML obligations, companies are also required to control the financial transactions of their customers.


How do companies improve their Customer Onboarding Process?


Banks, money transfer companies, fintechs, payment companies, accounting firms and all companies providing financial services have to comply with KYC and AML regulations. For financial companies, the AML and KYC compliance process is an endless process. Financial service providers, such as the bank, should take measures to ensure that their client account profiles are accurate and risk-based. In the past, the use of manual methods to combat financial crimes by companies has been complicated. Today, financial companies use AML Screening Service such as Sanction Scanner to meet regulatory requirements.


How did Papara speed up Customer Onboarding and Customer Monitoring processes?


Sanction Scanner is the Anti-Money Laundering Compliance Program in international standards. Sanction Scanner enables your business to comply with AML laws with Remittance & Payment Screening, Customer & Merchant Onboarding/Monitoring and Real-Time Transaction Monitoring features. Sanction Scanner helps financial firms comply with AML regulations. With Sanction Scanner, you can easily manage your customer onboarding, transaction screening and transaction monitoring processes. Our database consists of over 1000 Sanctions, regulatory and law enforcement and other official global and local sanction and pep lists, including those issued by the USA, UK, UN and other global major and minor government departments. Sanction Scanner never stores customer data and customer information. Customer queries made by companies are fully GDPR compliant. With Sanction Scanner you can fight financial crime. 


AML Compliance of Guulpay, a Fintech company | Case Study



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