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Anti-Money Laundering (AML)

What Is Anti-Money Laundering (AML)?

Anti-money laundering (AML) is a set of laws, regulations, and internal controls used by regulated organizations to detect, prevent, and report attempts to disguise illegally obtained funds as legitimate.

How Does AML Work?

AML programs target the three stages of money laundering: placement, layering, and integration. Controls are designed to interrupt the cycle at each of these stages.
Core components include:
  • Know Your Customer (KYC) and customer due diligence (CDD) checks at onboarding
  • Identification of beneficial owners when the customer is a legal entity
  • Risk assessment of the customer, product, geography, and delivery channel
  • Screening against sanctions lists and politically exposed person (PEP) lists
  • Ongoing transaction monitoring
  • Enhanced due diligence (EDD) for higher-risk customers
  • Reporting suspicious activity to the financial intelligence unit (FIU) or other designated authority
Regulators expect a risk-based approach: the higher the risk, the stronger the controls. Simplified checks may be acceptable for low-risk customers, while high-risk relationships require enhanced measures.
AML is not limited to onboarding. Checks may be repeated when the customer’s circumstances or risk profile change, transactions do not match the expected activity, previously collected information becomes outdated or doubtful, or there are signs that another person controls the account.

Who Must Comply with AML Requirements?

AML rules apply to financial institutions and to other businesses whose services can be used to move illicit funds:
  • Banks, payment companies, and fintech platforms
  • Cryptocurrency exchanges and remittance providers
  • Gambling operators
  • Life insurance companies and investment firms
  • Other regulated businesses defined by national law, such as real estate agents or dealers in high-value goods

How Can Regula Help with Anti-Money Laundering (AML)?

AML software usually focuses on screening and transaction monitoring. Regula works on the identity side of the program. Its SDKs help confirm that the customer is a real person with a genuine identity document before the business relationship begins.
Regula Document Reader SDK verifies the customer's identity document and extracts personal data, such as name and date of birth. It reads the document's visual zone with OCR, its machine-readable zone (MRZ), and, for chip-enabled documents, the NFC/RFID chip. The library includes more than 16,500 document templates from 254 countries and territories.
Regula Face SDK compares the customer's live photo with the portrait in the document through 1:1 face matching. Active or passive liveness detection helps confirm that a real person is present.
The verified identity becomes the basis of the CDD file, so screening, monitoring, and later investigations work with accurate customer data.

FAQ

What is the difference between AML and KYC?

AML is the overall framework for preventing money laundering, defined by laws and regulations. KYC is one of its components: the process of identifying the customer and assessing their risk before and during the business relationship. An AML program adds controls on top of customer knowledge, from monitoring transactions to reporting suspicious activity.

What are the three stages of money laundering?

Placement introduces illicit funds into the financial system. Layering hides their origin through transfers, exchanges, or complex structures. Integration returns the money to the owner as seemingly legitimate assets. A single scheme can pass through these stages several times, which makes detection harder.

How does identity verification support AML?

Screening and transaction monitoring assume that the customer is correctly identified. If onboarding accepts a forged document or another person's identity, alerts and investigations attach to the wrong identity. Document authenticity checks and biometric verification reduce this risk at the start of the relationship and make it harder to open accounts with stolen or synthetic identities.

When does an AML program require enhanced due diligence (EDD)?

EDD is applied to higher-risk customers, such as politically exposed persons or customers from high-risk jurisdictions. It may include additional documents, source-of-funds checks, and more frequent reviews. The trigger can also appear later, for example when the customer's ownership structure changes or new information comes up during screening. The exact scope of EDD is defined by the institution's risk-based policy and local regulation.

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