Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance are critical requirements for businesses operating in the UK. Whether you're a financial services firm, a professional services provider, or any business that needs to verify client identities, understanding these regulations is essential.
What is KYC?
Know Your Customer (KYC) is the process of verifying the identity of your clients or customers. In the UK, KYC requirements are primarily driven by anti-money laundering regulations and aim to prevent businesses from being used for financial crimes.
KYC typically involves:
- Customer identification - Collecting and verifying identity documents
- Customer due diligence (CDD) - Understanding the nature of the business relationship
- Enhanced due diligence (EDD) - Additional scrutiny for higher-risk customers
- Ongoing monitoring - Continuously reviewing customer relationships
UK AML Regulations
The UK's anti-money laundering framework is built on several key pieces of legislation:
The Money Laundering Regulations 2017 (MLR 2017)
The primary legislation governing AML in the UK, implementing the EU's Fourth and Fifth Anti-Money Laundering Directives. It applies to "relevant persons" including:
- Credit and financial institutions
- Auditors, insolvency practitioners, and tax advisers
- Independent legal professionals
- Trust or company service providers
- Estate agents
- High-value dealers (accepting cash payments over €10,000)
The Proceeds of Crime Act 2002 (POCA)
Creates offences related to money laundering and requires suspicious activity reports (SARs) to be submitted to the National Crime Agency.
The Terrorism Act 2000
Addresses terrorist financing and places obligations on businesses to report suspicious activities related to terrorism.
Customer Due Diligence Requirements
Under UK regulations, businesses must conduct customer due diligence when:
- Establishing a new business relationship
- Carrying out occasional transactions above €15,000
- There is suspicion of money laundering or terrorist financing
- There are doubts about previously obtained identification information
Standard Due Diligence
For most customers, standard due diligence includes:
- Identifying the customer and verifying their identity
- Identifying beneficial owners (for corporate customers)
- Understanding the purpose and intended nature of the relationship
- Conducting ongoing monitoring of the relationship
Enhanced Due Diligence
EDD is required for higher-risk situations, including:
- Politically Exposed Persons (PEPs)
- Customers from high-risk countries
- Complex or unusual transactions
- Correspondent banking relationships
Company Verification in KYC
When onboarding corporate customers, businesses must verify:
- Company identity - Company name, registered number, registered address
- Legal existence - Confirmation the company is registered and active
- Ownership structure - Identifying shareholders and beneficial owners
- Directors - Identifying and verifying the identity of directors
- Persons of Significant Control (PSCs) - Those with 25%+ ownership or control
CorporaOne automates company verification by providing instant access to Companies House data, director information, and ownership structures - reducing KYC processing time from days to minutes.
Beneficial Ownership Requirements
The UK's PSC (Persons with Significant Control) register requires companies to identify and register individuals who:
- Hold more than 25% of shares
- Hold more than 25% of voting rights
- Have the right to appoint or remove a majority of directors
- Otherwise exercise significant influence or control
When conducting KYC on companies, you must verify this information and identify the ultimate beneficial owners, even if they hold shares through intermediate entities.
Risk-Based Approach
UK regulations require a risk-based approach to AML compliance. This means:
- Assess risks - Identify and assess money laundering risks your business faces
- Design controls - Implement policies and procedures proportionate to those risks
- Monitor and review - Regularly review and update your risk assessment
- Document everything - Keep records of your risk assessments and decisions
Penalties for Non-Compliance
Failure to comply with AML regulations can result in severe penalties:
- Criminal prosecution - For individuals and businesses
- Unlimited fines - For serious breaches
- Regulatory action - Including suspension or withdrawal of authorisation
- Reputational damage - Public enforcement notices
How Technology Can Help
Modern compliance teams are increasingly turning to technology to streamline KYC and AML processes:
Automated Company Verification
Platforms like CorporaOne provide instant access to verified company data, reducing manual research and data entry.
Real-Time Monitoring
Set up alerts to be notified of changes to company filings, director appointments, or financial status.
API Integration
Integrate company verification directly into your onboarding workflows for seamless compliance checks.
AI-Powered Risk Assessment
Use AI to analyse company data and flag potential risks automatically.
Building a Compliant KYC Process
To build an effective KYC process:
- Document your policies - Create clear, written procedures
- Train your staff - Ensure everyone understands their obligations
- Use reliable data sources - Access authoritative company information
- Automate where possible - Reduce errors and increase efficiency
- Keep detailed records - Maintain audit trails for all checks
- Review regularly - Update your processes as regulations change
Ready to streamline your KYC compliance? Contact us to learn how CorporaOne can help automate your company verification process.