KYC and AML: Key Differences, Compliance, and Best Practices

Key takeaways
 

KYC and AML are complementary processes: the former verifies the customer’s identity, while the latter continuously monitors for suspicious activities.

A basic KYC process alone isn’t enough to prevent fraud—continuous monitoring and a comprehensive AML program are necessary.

Automating KYC and AML enhances user experience, cuts costs, and bolsters regulatory compliance.

Didit offers free, unlimited KYC powered by advanced AI, paving the way for efficient and affordable AML policies.

Today, it’s impossible to discuss financial crime prevention without mentioning KYC (Know Your Customer) and AML (Anti-Money Laundering). While these processes often work hand in hand, each plays a distinct role within the regulatory framework that governs financial institutions such as banks, fintech companies, cryptocurrency platforms, and any business handling sensitive transactions.

At Didit, we’ve been closely analyzing the evolution of identity verification and money laundering prevention systems. Our experience shows that identity verification alone is no longer sufficient to stop criminals in their tracks. In fact, nearly all illicit activities begin after the onboarding process is complete.

Does this mean KYC is unimportant? Quite the opposite—identity verification is the cornerstone in the fight against fraud, but businesses need additional tools to keep criminals at bay. This is where AML regulations come into play, establishing a solid foundation for rapidly detecting potentially illegal activities.

In this article, we’ll delve into the key differences between KYC and AML, discuss regulatory compliance, and share best practices for creating a secure and seamless onboarding process. Keep reading so you don’t miss a beat!

What is KYC (Know Your Customer)?

KYC, Know Your Customer, is the process that companies—typically regulated entities required to adhere to anti-money laundering standards—use to collect customer information and verify their identity.

The amount of identity information requested may vary by jurisdiction, but it usually includes at least the customer’s name, date of birth, and address.

The primary goal of KYC processes is to ensure that customers are who they claim to be, reducing the risk of fraud such as identity theft or emerging synthetic identities. Companies must ensure that submitted documents aren’t fake, altered, or AI-generated.

Traditionally, this process relied on collecting physical documents. Today, technology has advanced to include:

• Document verification using OCR to extract data and detect potential alterations.
• Facial recognition with liveness detection to confirm that the user is truly present and not a deepfake.

KYC is a Fundamental Pillar, But Not the Complete Solution

While KYC is essential for onboarding at any financial institution, KYC processes alone are not enough to shield a company from fraud. Most criminal activities occur after a user has joined the platform, leaving businesses that rely solely on initial verification exposed to subsequent fraudulent behavior. This is where AML regulations come into play.

Learn more about KYC processes and why they matter in 2025.

What is AML (Anti-Money Laundering)?

Anti-Money Laundering (AML) refers to the measures that financial institutions and other regulated entities must implement to prevent financial crimes, primarily money laundering and terrorism financing. For regulated industries, this means compliance teams must scrutinize consumers and their transactions, reporting any suspicious activity when necessary.

All regulated companies must implement their own AML measures in line with national and international regulations. Typically, national regulators base their guidelines on the recommendations set by the Financial Action Task Force (FATF), adapting them to local jurisdictions.

What are the Key Differences Between KYC and AML?

The primary difference between KYC and AML lies in their nature. AML involves a series of procedures and protocols that make up a company’s AML program, whereas KYC is just one component of that program. In this way, KYC plays a fundamental role in AML regulations.

What procedures and protocols are typically included in AML programs?

• Customer Identification Program (CIP)
• Enhanced Due Diligence (EDD)
• Risk assessment
• Ongoing monitoring
• Transaction analysis
• Reporting of suspicious activities and transactions

During the Customer Identification Program (CIP), companies identify and verify customers (KYC), define risk profiles, and screen government lists.

Which Institutions Need KYC and AML?

Not every company is required to comply with AML regulations, including KYC processes—it depends on the jurisdiction. However, the most common industries include:

• Financial institutions
• Credit institutions
• Payment entities
• Insurance companies/insurtech
• E-money companies
• Virtual Asset Service Providers (VASPs)
• Gambling operators

Key KYC and AML Regulations

As Luis Rodríguez, CEO of ComplianZen, explains in an interview in our Identity Unleashed newsletter, not all prevention regulations are identical, but they share the same goal: combating illicit money. Every country has its own regulations, typically influenced by FATF recommendations.

Here are some articles we’ve written discussing the most relevant regulations for each country:

• Identity Verification, KYC, and AML Compliance in Argentina
• Identity Verification, KYC, and AML Compliance in Brazil
• Identity Verification, KYC, and AML Compliance in China
• Identity Verification, KYC, and AML Compliance in the USA
• Identity Verification, KYC, and AML Compliance in Japan
• Identity Verification, KYC, and AML Compliance in Russia

Implementing KYC and AML in Your Business: Trust Automation

Looking to achieve a seamless and secure onboarding process for your business? The key is automation. Modern tools for KYC and AML not only enhance operational security but also boost conversion rates and reduce drop-offs.

Automating KYC offers numerous benefits for organizations, including significant cost savings, reduced operational expenses, and assured regulatory compliance. Learn more about the benefits of automated KYC on our blog.

With these tools, companies can verify their users’ identities online remotely in just seconds.

Additionally, AML Screening checks—a critical part of combating money laundering—can be automated, yielding substantial benefits. Known as Ongoing Monitoring, this phase cross-references user data against lists of Politically Exposed Persons (PEPs), sanctions lists, watchlists, and adverse media.

Technology now makes it possible to automate the entire KYC and AML workflow, allowing you to customize risk indicators and monitor your business in real time.

Why You Need KYC and AML in Your Compliance Strategy: Best Practices for Banking, Crypto, and Fintech

Relying solely on a basic KYC process during onboarding can leave your platform vulnerable to exploitation by criminals engaging in money laundering or illegal financing. An integrated KYC and AML approach translates into:

1. Protecting your company’s reputation: Non-compliance fines can reach millions and severely damage your corporate image.
2. Reducing financial losses: Fraud can incur high costs—from refunds and fines to lost trust.
3. Ensuring regulatory compliance: Failure to meet local and international regulations can lead to restrictions, operational blocks, or even license revocation.
4. Streamlining onboarding processes: Automation and continuous analysis build trust with both legitimate users and regulators.

How Didit is Revolutionizing Identity Verification, KYC, and AML

At Didit, we offer the only free and unlimited KYC solution on the market—designed for businesses of all sizes and industries to safeguard against fraud without incurring prohibitive costs. How do we do it?

• We utilize over 10 specialized AI models to detect document forgeries, deepfakes, and other fraud patterns.
• Facial recognition with liveness detection employs both active and passive techniques to verify a person’s real presence.
• Our simple-to-integrate API lets you deploy a secure onboarding process for customers in over 220 countries and territories in just a few hours.
• A daily-updated document database ensures accurate detection and an ever-expanding range of supported documents.

To date, over 600 companies have integrated our technology into their identity verification and AML workflows.

The GBTC Finance Case

GBTC Finance is an online exchange and a network of specialized stores dedicated to cryptocurrency trading and solutions for the crypto community. With over 20 locations across Spain and a growing base of more than 30,000 satisfied customers, they provide personalized support and a wide range of services—from training to payment tools for crypto businesses.

Didit assisted GBTC Finance by providing:

• Document verification
• Facial recognition
• AML Screening

Thanks to our collaboration, GBTC Finance has reduced compliance costs by up to 90% compared to other providers. Learn more about the GBTC Finance success story here.

The Bondex Case

Bondex is a next-generation professional network built on blockchain, designed to connect over 5 million professionals worldwide. The platform focuses on talent, reputation, and economic opportunities, allowing users to build verifiable profiles that unlock new career possibilities. With a strong commitment to privacy, Bondex is emerging as a leader in the social sphere of Web3.

Didit supported Bondex by providing:

• Document verification
• Facial recognition

Thanks to our partnership, Bondex has eliminated all identity verification costs—saving around $5,000 per month with our free plan. Learn more about the Bondex success story here.

Conclusion: Moving Towards Comprehensive Compliance

In an increasingly digital and globalized world, KYC and AML are the cornerstones of any compliance strategy. While KYC focuses on verifying user identity and legitimacy, AML adopts a broader approach to detect and report any illegal activity throughout the customer lifecycle.

At Didit, we believe that humanizing the internet in the age of AI means making identity verification accessible to every business—free from economic and technological barriers. That’s why we offer the only free and unlimited plan on the market, helping you meet regulatory obligations and combat fraud efficiently and effectively without breaking the bank.

Click the banner below to get started with our free KYC plan now.

About the Author

Víctor Navarro

Specialist in Digital Identity and Communication

I am Víctor Navarro, with over 15 years of experience in digital marketing and SEO. I am passionate about technology and how it can transform the digital identity sector. At Didit, an artificial intelligence company specialized in identity, I educate and explain how AI can enhance critical processes such as KYC and regulatory compliance. My goal is to humanize the internet in the age of artificial intelligence, offering accessible and efficient solutions for individuals.

"Humanizing the internet in the AI age"

For professional inquiries, contact me at victor.navarro@didit.me