
The Changing Landscape of KYC/AML Regulations in 2021

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Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations have been evolving over time. As the world moves forward, these regulations will experience more changes. After the coronavirus struck the world, fraudulent activities across the world increased. Given the need for more rigid regulations, KYC and AML regulations will change in 2021. Criminal activities like money laundering and terrorist financing have increased; therefore, all regulatory authorities have made some changes to the KYC/AML regulations. Due to the COVID-19 pandemic, all industries are facing significant challenges and more rigid laws will make it easier for companies to fight frauds. Â
The European Union (EU), FinCEN, FINTRAC, and Ukraine’s two-tier system are in the pipeline this year. We have briefly discussed all these new changes in this blog. Keep reading to find out.Â
KYC/AML regulations refer to a framework that is designed to assist different sectors of the world. KYC and (AML) laws are designed to combat crimes like identity theft, money laundering, terrorist financing, and account takeover. Regulatory authorities like FATF, FINTRAC, and FinCEN have enforced certain laws to tackle crimes.
The post-Brexit situation in the United Kingdom is not very good. Companies are not following the directives from the European Union and the UK has implemented the Sanctions and Money Laundering Act of 2018 in the country. According to the EU, the Act of 2018 is not up-to-date and has certain lackings that may not be able to counter money laundering and terrorist financing activities within the country. Secondly, trade scenarios with the UK will experience various pitfalls as well.Â
According to the Sanctions and Money Laundering Act of 2018,Â
The sixth anti-money laundering directive was planned for 2021. However, the rise in fraudulent activities during the pandemic led to its enforcement in December 2020. The KYC and AML protocols in 6AMLD claim to be more rigid and fight money laundering and terrorist financing (ML/TF), identity theft, account takeover, and other types of crimes in 2021. Here’s a brief overview of the sixth anti-money laundering directive (6AMLD):
One to four years of imprisonment for offences like ML and TFÂ
Australian Transactions Reports and Analysis Center (AUSTRAC) also stepped forward when the pandemic struck. Since KYC/AML regulations became harder to comply with during lockdown, it provided alternative methods for compliance with the laws. Although conventional KYC checks are no longer used, AUSTRAC also encouraged digital KYC verification. These amendments are expected to change the regulatory framework in the long-run. Following are the alternatives that were recommended for the Australian organisations.Â
Recommended: KYC Verification Process – 3 Steps to Know Your Customer ComplianceÂ
FinCEN has taken necessary steps to amend the Bank Secrecy Act (BSA). Updates have become mandatory for the act due to remarkable innovations in the finance sector. Changes in this Act are expected to bring a drastic change in the overall crime rate in the country. Here are the alterations suggested by FinCEN:
In April 2020, Ukraine’s New AML law was enforced. The country will follow a two-tier system as per the law. The two levels of financial monitoring include initial and state levels. The members include:
Individuals and legal entities at the Initial Monitoring Institutions level must register with SSFCU.
The new AML law state that:
FINTRAC is the regulatory authority of Canada and has a few KYC/AML regulations in the pipeline that will be effective in the second half of 2021. First, there are laws for identity verification conducted by other reporting firms. Second, services and products are now subject to PCMLTFA. According to these laws:
Reporting entities can conduct identity verification themselves. They can also rely on agents or affiliates’ information for ID verification.Â
Suggested: Online Identity Verification – 5 Trends to Expect in 2021
Every year, there are significant changes in the KYC/AML regulations. Due to the pandemic, criminal activities increased and now almost every state has to reconsider the laws. FINTRAC, FinCEN, AUSTRAC, and other authorities have already enforced amended regulations. On the other hand, Brexit has forced the UK to implement the Sanctions and Money Laundering Act of 2018. The 6AMLD is also in action in the European Union. All in all, enhanced regulations are all set to change the game for businesses. Is your business KYC/AML compliant?Â
For information on how we can help you in KYC/AML compliance, get in touch with our experts.Â