Simplified AML Compliance: A Guide for SMEs and Startups
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Key takeaways
Adhering to AML regulations is crucial for safeguarding the reputation and long-term viability of SMEs and startups—helping you avoid massive fines.
A robust identity verification process (KYC) is the vital first step in preventing money laundering and ensuring regulatory compliance.
Leveraging advanced technologies like artificial intelligence and machine learning enables real-time monitoring while cutting operating costs in AML programs.
Understanding and adapting to region-specific regulations—whether in Spain, Latin America, or the United States—allows you to develop effective, competitive compliance strategies.
Running an SME or startup while having to comply with anti-money laundering (AML) regulations can be a real headache. You’ve told us in recent meetings—one executive even remarked, “It’s like juggling on a unicycle”—so if you’re feeling the same way, know you’re not alone.
Regulations aimed at preventing money laundering and terrorism financing (AML/CFT) are increasingly stringent, and with so many sources of documentation, keeping everything under control can be extremely challenging for a small team.
However, regulators aren’t concerned with your challenges—they care about compliance. In 2024, record fines were imposed for weak anti-money laundering processes, as reported by ComplyAdvantage. Such multi-million dollar penalties could jeopardize a company’s survival.
So what’s the common issue across most industries? A flawed identity verification (KYC) or customer due diligence (CDD) process. Having the right tools at this initial point of contact with potential customers is essential to avoid problems down the road.
If you run a small business or startup and worry about meeting AML regulations, don’t stress—this guide will provide you with the essential keys to simplify compliance, protect your business, and steer clear of penalties.
Keep reading!
Regulatory Compliance for SMEs and Startups: What is AML and Why is it Important?
Anti-Money Laundering (AML) refers to the set of policies, procedures, and controls that a company must implement to prevent direct or indirect involvement in money laundering or terrorism financing activities. Its impact goes beyond mere regulation—it helps keep the financial system free from illicit funds. For SMEs and startups, an AML program is more than just a regulatory requirement; it’s an investment in reputation and business sustainability.
In fact, regulators don’t differentiate between large banks and small companies. Everyone must comply, and failure to do so can lead to penalties.
Key AML Challenges for SMEs: The Current Landscape
Many small businesses and startups face significant challenges when it comes to complying with anti-money laundering regulations:
- These companies often have limited resources—both human and financial—making it difficult to build or expand dedicated compliance teams.
- Regulations are constantly evolving to counter new types of fraud.
- Investing in advanced technological solutions can be an unaffordable expense for many small enterprises.
Key AML Regulations Every Small Business Should Know
While anti-money laundering rules are continually evolving and differ by jurisdiction, there are several key points every small business should understand.
- FATF Guidelines. The Financial Action Task Force sets the global standards and recommendations for combating money laundering and terrorism financing. The organization recently released its 2023-2024 annual report, which updates several prevention recommendations.
- Local and Regional Regulations. Each jurisdiction adapts FATF’s recommendations to its specific context, so small businesses need to stay informed about the rules affecting their sector. We’ll cover some of the most important regulations by country shortly.
Remember, 2024 was a wake-up call—with record fines underscoring the importance of leaving no loose ends in your compliance process.
AML Compliance in Spain, Latin America, and the United States: Key Regulations for SMEs and Startups
As Luis Rodríguez, CEO of ComplianZen, explained in a recent interview in our newsletter, regulations may differ, but they all share a common goal: preventing money laundering. Understanding the specific rules in each region—and how they impact your small business or startup—is key to avoiding penalties.
AML Compliance in Spain
In Spain, Law 10/2010 lays the foundation for anti-money laundering efforts. In short, SMEs must:
- Identify and verify their customers’ identities using KYC processes before entering any business relationship.
- Assess risks based on customer type, product, or region.
- Report suspicious transactions to SEPBLAC, the main regulatory body.
In this article, we explain how KYC and AML processes work in Spain if you’d like to dive deeper.
AML Compliance in Latin America
The regulatory complexity across Latin American countries, combined with many small businesses’ limited resources, presents unique challenges.
- Mexico. The Federal Anti-Money Laundering Law requires companies to report suspicious transactions to the Financial Intelligence Unit (UIF) and conduct rigorous customer checks. Learn more about KYC and AML regulations in Mexico.
- Colombia. Companies subject to SARLAFT must develop risk management systems and report unusual activities to authorities. Learn more about KYC and AML regulations in Colombia.
- Argentina. Law 25.246 requires reporting suspicious transactions to the Financial Intelligence Unit (UIF). Penalties for KYC non-compliance can be severe. Learn more about KYC and AML regulations in Argentina.
AML Compliance in the United States
The U.S. regulatory framework is among the strictest. In fact, the focus on anti-money laundering started in the U.S. to prevent illegal funds from entering the financial system. These measures were tightened following the September 11, 2001 attacks. Key regulations include:
- Bank Secrecy Act (BSA). This law requires all companies to report suspicious activities to FinCEN.
- Patriot Act. It strengthens counter-terrorism financing controls, increasing monitoring requirements.
In this article, we explain how KYC and AML processes work in the United States if you’d like to learn more.
How Small Businesses Can Implement an Effective AML Program
SMEs and startups can build a robust AML program based on three fundamental pillars: onboarding, continuous monitoring, and reporting.
Onboarding and Identity Verification (KYC)
Before starting any business relationship, it’s essential to know your customer. An effective KYC program helps you to:
- Validate and verify your customer’s identity. This means ensuring that the documents provided are authentic and truly belong to the person undergoing verification.
- Establish a risk profile. Risk-based strategies help you classify customers and optimize resources—especially important for SMEs and startups with limited capacity.
This is where Didit stands out from other identity verification providers. We offer a free, unlimited KYC plan that you can easily and quickly implement, allowing you to verify your customers’ identities with over 10 AI models—at no cost and with complete security. Learn more about our free identity verification plan.
Continuous Monitoring
Continuous monitoring is essential to ensure that users remain within the profiles you’ve set and aren’t using your systems for money laundering. For this, AML screening and transaction monitoring are crucial.
- AML Screening checks enable you to cross-reference verified identities against various national and international databases to ensure that individuals aren’t on watchlists, sanctions lists, or classified as a Politically Exposed Person (PEP). These checks should be performed immediately after a user verifies their identity—and ideally repeated daily—to confirm that their status hasn’t changed. Setting up risk indicators and alerts is therefore essential.
- Real-time monitoring allows you to oversee user transactions as they occur, helping you promptly detect changes or suspicious activities.
Automating these processes will save time, cut costs, and help you maintain a much more efficient compliance department.
Reporting
If any suspicious activity is detected through these indicators, it’s critical to document and report it to the relevant regulators, such as SEPBLAC in Spain. Collecting all possible information and reporting the potential illicit activity is key.
Knowing how to complete the appropriate forms and report these potentially suspicious activities to regulators is essential.
How Technology Helps SMEs and Startups with AML Compliance
Technology is revolutionizing how companies handle regulatory compliance. Regardless of size or industry, innovations like artificial intelligence, machine learning, and biometrics are helping businesses streamline all their processes. How?
- Optimize identity verification and regulatory compliance. Leveraging various AI models for document verification and facial recognition helps prevent fraud (such as tampered documents or deepfakes) in real time, making the KYC process faster, more efficient, and secure.
- Reduce operating costs. Automating processes (like identity verification) eliminates the need for manual work, which is often more expensive, error-prone, and provides a poorer user experience. In this article, we explain how a free KYC solution can improve three key business metrics, such as customer acquisition cost, acceptance times, and the ROI of your compliance department.
- Enhance efficiency. Artificial intelligence and machine learning can automatically process and cross-reference large volumes of data, allowing for quicker detection of irregularities and faster action.
In short, technology helps you comply with anti-money laundering regulations, optimize your processes, and maintain a great user experience during onboarding.
Conclusion: AML for Small Businesses—A Challenge and an Opportunity
Complying with AML regulations might seem like a monumental challenge for any business—especially for SMEs or startups. However, with the right approach and the right tools, you can turn this challenge into a competitive advantage. Identity verification, or KYC, is fundamental as it’s the first point of contact with a potential customer and lays the groundwork for any AML program.
At Didit, we believe technology should be your ally in simplifying regulatory compliance and transforming it into a competitive strength. That’s why we invite you to try our free, unlimited KYC plan—the perfect solution to help you take the first step toward a robust AML program.
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Simplified AML Compliance: A Guide for SMEs and Startups
