Verifying the client’s identity is imperative in making the financial system secure through KYC and AML compliance. KYC Regulated Industries are those which need to stay compliant with KYC AML regulations. This article enlists and describes the main industries that are regulated by KYC and AML regulations.
What are KYC Regulated Industries?
Primarily, these industries exist in every progressive economy. Also, these industries have a specific money trail and established global presence. So, these industries are vulnerable to the threats of Money Laundering and Terrorism Financing. Key Industry players in the said industries have been identified as criminals. But that’s not always the case as Industries themselves have a requirement to build customer trust.
Therefore, our KYC/AML Guide has enlisted some of the prominent industries which are regulated.
List of KYC Regulated Industries
Notably, there are 8 main industries that comply with KYC AML regulations.
1 Banking & Finance
The banking and Finance sector is the most regulated by KYC and AML regulations. It is because of the fact that the largest cash flow is through banks and other Financial Institutions. Globally, every bank and FI needs to comply with the KYC and AML policies of the territory they are serving. Similarly, bank accounts, loans, payments, and transactions through banks and FIs are closely monitored for any suspicious activity. Although not every transaction will be deeply monitored yet, KYC has become the most basic requirement while hiring any financial service. Money Launderers try to hide their illicit money in banks. They do this through the Money Laundering process of 3 stages.
2 Government Agencies
Government Agencies being the most sensitive organizations have a requirement of KYC be done for every single person. However, levels of KYC differ for example the Due Diligence Process is different for the risk levels of customers. Customer Due Diligence vs Enhanced Due Diligence is the two main Due Diligence process that entails a risk-based approach to prevent Money Laundering. Besides, due diligence processes are carried out in all KYC Regulated Industries. The data of clients and employees is collected and verified to keep government agencies safeguarded from criminals and terrorists.
3 Non-Profit Organizations
Mostly, Non-Profit Organizations (NPOs) and Non-Governmental Organizations (NGOs) do KYC to prevent fraud and scams. Money Launderers also hide their money through charitable donations to NPOs and NGOs. People out of sympathy ignore the sources of funding in NGOs or NPOs. But now, every single NPO and NGO is required to follow KYC and AML regulations.
4 MSB (Money Service Business)
Money Service Businesses are also a weapon of choice for Money Launderers. Notably, Cryptocurrency, Currency Exchanges, Money transfer service providers, etc are the prime targets. A money service business offers a high amount of cash inflows and outflows making it difficult for regulators to identify illicit money. This is why MSBs are subjected to stringent KYC and AML regulations.
Undeniably, the Telecommunication sector is one of the most important KYC Regulates Industries. From the issuance of Prepaid SIM cards to Mobile Wallets and Roaming Services, every single set of Mobile Phones and Internet service requires KYC regulations. Customer ID Card Verification, Proof of Address, and Biometrics are mandatory requirements before availing of Telecommunication services.
6 Retail & E-Commerce
Retail & e-commerce is highly regulated by KYC & AML regulations. This is due to the fact that customers/clients in retail and e-commerce also make a high number of transactions. So, to keep a close watch on the customers, KYC and AML checks are applied on every transaction and every customer. For example, customer receipts, online transactions for the purchase of high-value items and etc.
7 Real Estate
Real Estate is among the top KYC Regulates Industries for being favorable for criminals. Money Launderers and Drug Kingpins use their money to invest in real estate for hiding their illicit money in legal real estate. So, to uncover this, KYC and AML regulators are always keeping checks on real estate agencies to prevent Money Laundering.
Hospitals, Clinics, and other healthcare facilities are subjected to KYC in many countries. Especially, charitable hospitals and government-funded ones are at the top of the list. Besides, healthcare professionals who are wealthy like dentists and senior surgeons are also subjected to KYC regulations. Patient data, hospital bills, doctor’s income statements, and bank accounts are verified to find Money Laundering trails.
Briefly, KYC Regulated Industries are most vulnerable to the threat of Money Laundering and Terrorism Funding. To mitigate this, KYC and AML regulatory bodies primarily focus on monitoring these industries. It is in the client’s best interest to cooperate with law enforcement in case of any questioning and report any suspicious activity. Especially, if the suspicion appears to be a fraud or scam.
Frequently Asked Questions
Mainly, two documents are required for anyone to be regulated by KYC.
- A photograph
- Proof of Address
With this being said, Customers need to provide the updated government-issued ID card and other necessary documents for the KYC.
The Gambling/Gaming Industry is considered to be the most vulnerable and criminally owned industry as per KYC and AML statistics worldwide. Since, gambling is illegal in many countries but legal in others, so it is quite complicated while laying hands on the Gambling Industry owners for Anti-Money Laundering.