Flow of Fundsby Fintech North

KYC / AML

message leg

Also known as: know your customer, anti-money-laundering, customer due diligence, CDD, identity verification

The identity checks and ongoing monitoring a regulated financial party must run to confirm who its customers are and to detect suspicious activity.

KYC (know your customer) is the process of verifying a customer's identity before and during a financial relationship: collecting and checking things like name, address, date of birth, and identity documents. AML (anti-money-laundering) is the broader set of obligations to monitor activity and report transactions that look like money laundering or other financial crime. These are message-and-control layers, not money movement: they decide whether an account opens, stays open, or gets frozen, and they sit around the edges of nearly every flow. Banks, payment companies, and program managers all carry some version of these duties, with the exact rules set by each country's regulators and law.

In a flow

KYC usually happens at onboarding, before a party can send or receive funds, and AML monitoring runs continuously in the background on the flows that follow. In a typical sponsored program, the program manager and its sponsor bank share responsibility for verifying customers and watching transactions. None of this moves money itself; it gates and watches the money legs that the banks execute.

Common misconceptions

  • Myth: KYC and AML are the same thing.

    Reality: KYC is one part of AML. KYC is mainly about verifying identity at onboarding; AML is the wider program of ongoing monitoring, record-keeping, and reporting that KYC feeds into.

  • Myth: Only banks have to do KYC and AML.

    Reality: Many non-bank players (payment processors, program managers, crypto on-ramps and off-ramps) carry obligations too, though who is ultimately responsible depends on the structure and the jurisdiction.

Related terms

Program managerSponsor bankFBO Account (For Benefit Of)Escrow3-D Secure (3DS)Merchant of Record (MoR)

See it in a guide

What an FBO account is, and why fintechs use oneHow a marketplace pays out its sellersHow a wallet top-up worksOn-ramps and off-ramps: moving between cash and stablecoinsHow a cross-border remittance reaches family abroad

Sources

Educational, plain-English explainers. Not legal, compliance, tax, or financial advice. These cover fundamentals, not current fees, limits, or rates (which change). Rails and parties vary by program and country, so verify specifics against primary sources. Last reviewed June 2026.