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KYC requirements
The know your customer or know your client (KYC) guidelines and regulations for financial services require that professionals try to verify the identity, suitability, and risks involved with maintaining a business relationship.

Legal affairs

National regulatory framework regarding AML and effective date of the regulations

There is no unified national regulatory framework regarding AML in the United States. There are numerous federal laws that may affect the AML/KYC compliance that a particular FinTech company may perform: 

  • The BSA, which establishes recordkeeping and reporting requirements for banks and other financial institutions and requires banks to (1) report cash transactions over $10,000 using the Currency Transaction Report; (2) properly identify persons conducting transactions; and (3) maintain a paper trail by keeping appropriate records of financial transactions.
  • The Money Laundering Control Act of 1986, which makes money laundering a federal crime and enacted procedures requiring banks and financial institution to establish monitoring and reporting controls.
  • The Anti-Drug Abuse Act of 1988, which requires verification of identity of purchasers of monetary instruments over $3,000 and expanded the definition of financial institution.
  • The Annunzio-Wylie Anti-Money Laundering Act, which requires submission of Suspicious Activity Reports and establishes recordkeeping and verification requirements for wire transfers.
  • The Money Laundering Suppression Act, which required registration by MSBs and enhanced anti-money laundering procedures.
  • The USA Patriot Act, which prohibits dealings with foreign shell banks, enhanced due diligence procedures for financial institutions and expanded AML programs, among other things.
  • Various sanctions and anti-terrorism laws, which prohibit all financial transactions with certain foreign jurisdictions, foreign government officials or individuals who are on specially designated nationals lists.
  • The Corporate Accountability Act, which goes into full effect in 2023, which will require public identification of the significant owners of most entities.
  • The Infrastructure Investment and Jobs Act, slated to take effect at the end of 2023, which will require IRS reporting of crypto currency transactions of greater than $10,000, and other tax laws that require the reporting of overseas holdings.
The AML/KYC requirements of a FinTech will differ significantly depending on the activities that it conducts and the regulations to which it is subject. All FinTechs, however, should have safeguards in place to comply with applicable sanctions and anti-terrorism laws.

National regulator or relevant authority for AML controls

There is no unified national regulator for AML controls. Different regulators have enforcement authority with respect to different sets of laws and different types of market participants. These regulators include FinCEN, the National Security Agency, the SEC, the FDIC, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS, and the United States Secret Service, among others.

Customer Due Diligence

Conduct of a typical KYC identification process

As there are no unified KYC laws, there is no such thing as a “typical” KYC identification process. What is required may differ significantly between different market participants and depending on the level of potential risk associated with the person on whom KYC is being performed.

Possibility to meet customer due diligence requirements by relying on third parties who are obliged by law themselves to comply with AML regulations

While market participants can still have strict liability for transacting with persons



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