Know Your Customer (KYC): Global Regulatory Landscape and Compliance Standards
Know Your Customer (KYC) is a due diligence process implemented by businesses, particularly those in banking, fintech, and financial services, to verify the identity of their clients, assess the legitimacy of their funds, and evaluate their overall risk profile. This is done by collecting and validating key information such as personal identity documents, proof of address, financial statements, and sometimes, the source of their wealth. KYC goes beyond onboarding to include ongoing monitoring of financial transactions and periodic review of client risk so suspicious behavior can be flagged early and appropriate action can be taken.
KYC is the cornerstone of global anti-money laundering (AML) and counter-terrorist
financing (CTF) efforts, enabling companies to prevent their platforms from being misused and complying with national and international regulation set by organizations like the Financial Action Task Force (FATF). Failure to implement proper KYC procedures can leave institutions vulnerable to regulatory penalties, reputational damage, and significant loss in consumer confidence.
Although implementing KYC complaint procedures can be complex and resource intensive, it is essential for sustainable growth both nationally and internationally. Well implemented KYC practices are able to both prevent fraud and protect customer data, enabling more personalized services and stronger business relationships. As the world becomes more digitally interconnected, innovations such as e-KYC, biometric verification, and AI-driven risk scoring are increasingly being leveraged to streamline compliance and improve customer experiences, making KYC not just a regulatory requirement but a competitive advantage as well!
KYC Regulatory Framework
The framework for KYC compliance is largely dictated by the Financial Action Task Force (FATF), an intergovernmental body established in 1989, that sets AML and CTF standards worldwide. Over 200 jurisdictions have adopted the FATFs 40 Recommendations, which have been continuously updated over the years, and built upon them on the national level.
The organization conducts mutual evaluations to assess member countries in terms of both the technical compliance of their AML/CTF laws as well as the effectiveness of their implementation. Countries that fail these evaluations can be placed on the FATF’s grey list or blacklist, thus severely limiting their access to international financial markets. Being on these lists can have extraordinary impacts on the financial wellbeing of a region which drives countries to pass and enforce relevant laws.
While some overarching principles are universal like customer due diligence (CDD), enhanced due diligence (EDD) for high risk clients, and ongoing monitoring, the specific rules can vary significantly from country to country. National regulations are able to interpret FATF guidelines through local risk assessments, financial sector maturity, and enforcement capabilities. Most jurisdictions have dedicated regulatory bodies that enforce KYC and AML compliance and can impose fines or mandate reforms when lapses are found.
Because of the digital-first reality of the modern financial system, new provisions around remote onboarding, digital identity verification, and automated transaction monitoring are being introduced internationally. In some parts of the world, regulatory scope has also broadened to include non banking institutions such as virtual asset service providers (VASPs), fintech startups, cryptocurrency exchanges, real estate professionals, and even lawyers and accountants. This reflects a growing recognition that money laundering and fraud can extend beyond traditional financial avenues.
What follows is a jurisdiction by jurisdiction overview of key KYC regulators, national enforcement trends, and high-profile compliance actions from the past few years, highlighting how global principals are being applied in local contexts.
United States
The United States maintains one of the largest and most far-reaching systems for KYC and AML compliance. It is underpinned by the Bank Secrecy Act (BSA) of 1970, which has undergone significant evolution over the years to address the growing complexity of financial crimes, including the USA PATRIOT Act in 2001, and the Anti-Money Laundering Act of 2020.
FinCEN (Financial Crimes Enforcement Network)
FinCEN is a bureau of the U.S. Treasury Department that enforces the BSA and oversees KYC/AML compliance for businesses such as banks, money service businesses, casinos, securities firms, and a growing number of fintech and virtual asset service providers (VASPs). It also oversees Suspicious Activity Reports (SAR) filing, Customer Due Diligence (CDD) obligations, and beneficial ownership transparency as laid out in the Corporate Transparency Act of 2024.
OFAC (Office of Foreign Assets Control)
OFAC administers and enforces U.S. economic and trade sanctions aligned with national security and foreign policy goals as directed by the President and established through acts of Congress. As part of KYC obligations, institutions must screen clients against OFAC’s Specially Designated Nationals (SDN) and blocked person list.
Recent Enforcement
TD Bank (October 2024)
In one of the largest AML enforcement actions in recent history, TD Bank pleaded guilty to violations of the BSA and agreed to pay a $3 billion penalty. This was the result of TD failing to adequately monitor and report over $670 of suspicious transactions spanning multiple years and reflecting systemic breakdowns in internal controls, transaction monitoring and SAR filing. As part of the resolution, TD Bank was required to appoint an independent compliance monitor to oversee its AML remediation efforts over a three year period.
United Kingdom
Since leaving the European Union, the UK has maintained and expanded its own AML and CTF mandates, mostly in line with the Money Laundering Regulations of 2017, and amended as needed.
Financial Conduct Authority (FCA)
The FCA has broad authority to supervise financial service companies and enforce AML/KYC requirements, evaluating how they manage financial crime risks, including how they perform customer identity checks, maintain due diligence checks, and monitor transactions. They also have the power to levy fines, restrict business activities, or, in extreme cases, revoke licenses.
Recent Enforcement
Equifax Limited (October 2023)
Equifax Limited was recently fined £11.16 million by the FCA for significant shortcomings in how it managed a 2017 cyberattack that affected its U.S. parent company, leading to the exposure of 14 million UK customer’s personal data. The FCA determined that Equifax UK had failed to exercise sufficient oversight over its parent company’s handling of sensitive personal data and despite the process taking place overseas, Equifax Limited retained responsibility under UK regulations. They cited weakness in Equifax’s risk management, security arrangements, and governance procedures, factors that directly contributed to the breacht’s impact on UK customers.
European Union (EU)
The European Union has taken a progressive, layered approach to combat financial crime, emphasizing cross-border consistency in how institutions identify clients, assess risk, and report suspicious activities.
AML Directives (AMLDs)
Established in 1991, each iteration of the Anti-Money Laundering Directives work to refine and strengthen compliance expectations across Europe. The Fourth AML Directive (2015) established minimum KYC and due diligence requirements for banks, real estate agents, accountants, and other financial service providers, while the Fifth AML Directive (2018) broadened the scope to include cryptocurrency platforms and prepaid card issuers.
More recently, the Sixth AML Directive (2021) expanded criminal liability for money laundering related offenses to legal entities, meaning that companies themselves can be held responsible for AML breaches committed by their employees.
Recent Enforcement
Euram Bank (October 2024)
In October 2024, the Austrian Financial Market Authority (FMA), ordered the European American investment bank AG (Euram Bank) to halt operations immediately due to anemic AML controls. The FMA had warned Euram Bank earlier in the year to comply with AML Directives to prevent money laundering but they were found to have not adequately addressed these issues.
China
China utilizes a dual-regulator structure for national financial oversight and AML enforcement, with responsibilities split between the country’s central bank and designated financial regulation authority. In recent years, China has expanded its focus on aligning domestic efforts with international standards while simultaneously addressing unique domestic challenges like large scale cash transactions and underground banking networks.
People’s Bank of China (PBC)
Under the Anti-Money Laundering Law of the People’s Republic of China, the PBC is responsible for drafting AML policies, establishing regulatory requirements for customer identity verification, and investigating financial institutions suspected of compliance lapses. The PBC also oversees the China Anti-Money Laundering Monitoring and Analysis Center (CAMLMAC), which like other FIUs, gathers and analyzes transaction data to detect suspicious behavior across the financial system.
China Banking and Insurance Regulatory Commission (CBIRC)
The CBIRC ensures that institutions properly implement the AML standards put in place by the PBC by reviewing internal control mechanisms, onboarding procedures, and ongoing due diligence efforts. Since its establishment in 2018, the CIBRC has helped improve China’s KYC protocols, especially among state-owned and rural financial institutions that have historically lagged in compliance.
Recent Enforcement
Ant Group (July 2023)
After the conclusion of a multi-year investigation, the PBC imposed a fine of 7.123 billion yuan (~$984 million USD) on Ant Group for an array of infractions including AML failures, lax consumer protection practices, and inadequate corporate governance. With this fine, regulators sent a message that fintech firms, regardless of size or influence, must comply with KYC regulations to the same extent as traditional banks to prevent the misuse of their financial products.
India
India’s primary AML statute is the Prevention of Money Laundering Act, created in 2002, and provides the legal foundation for a broad range of compliance obligations that have been implemented in the past two decades.
Reserve Bank of India (RBI)
The RBI, India’s central bank, issues master directives and periodic updates that specify how financial institutions must verify customer identities, maintain records, and assess risk. Beyond rulemaking, the RBI also conducts audits, on-site inspections, and thematic reviews to ensure institutions are not only adopting proper policies on paper, but effectively implementing them. Their enforcement power includes levying fines and imposing restrictions on business operations for persistent non-compliance.
Financial Intelligence Unit (FIU-IND)
The FIU-IND serves as India’s central agency for receiving, processing, and analyzing suspicious transaction reports (STRs) submitted by reporting entities and works to facilitate inter-agency cooperation as well as support law enforcement investigations. In recent years, the FIU-IND has increasingly emphasized data-driven monitoring, cross-sectoral intelligence sharing, and faster turnaround on compliance deficiencies (especially as financial services expand digitally).
Recent Enforcement
HDFC Bank and Punjab & Sind Bank (March 2025)
In March 2025, the RBI imposed fines of ₹75 lakh (~$87,000 USD) and ₹68.20 lakh (~$80,000 USD) against HDFC Bank and Punjab & Sind Bank respectively. These were as a result of lapses in customer identification procedures and failure to maintain consistent risk classification protocols. While regulators noted that these penalties were as a result of procedural gaps, not deliberate wrongdoing, they still emphasized the importance of maintaining strict oversight, especially with the prevalence of digital onboarding.