Zeen Train
@zeentrain
Finally decided to do a mini-series on the Anti-money laundering (AML) regulations + KYC. This will be the first cast going over high-level regs + some examples to understand basics
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Zeen Train
@zeentrain
I was an independent auditor for AML + Sanctions regimes across a litany of entities such as small farm banks, international FinTechs, Crypto companies, and large regional banking firms. I have seen every type of program you will encounter and done it across different countries. aka I know what I am talking about
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Zeen Train
@zeentrain
AML regulation is annoying with its checklist of acronyms, so I will start with a couple of definitions here: - Bank Secrecy Act (BSA) | AML framework in USA. The main point of reference here - Know your customer (KYC) | Common term for customer identification and ongoing risk management. Included within the term AML
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Zeen Train
@zeentrain
At a high level, AML regulations are basically the same everywhere you go. Yes, there are slight differences, but the pillars don't change: - KYC - Transaction monitoring - Sanctions
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Zeen Train
@zeentrain
A simple example of customer identification is that in the USA, by law, all affected entities must collect: - Name - Date of birth - Address - SSN - A way to verify identity via a document (license) or a non-documentary method (3rd party provider)
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Zeen Train
@zeentrain
Contrasting that with Hong Kong, they require everything that the US does + some way to verify the person's address. Verifying an address is another piece of overhead the USA decided not to adopt, but the meat is the same
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Zeen Train
@zeentrain
Since we know that AML regimes are 95% the same, we also need to understand the principle that underpins all of it, the Risk-Based Approach®. This is the most essential principle to understand AML and can be best described as a ~vibe~
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Zeen Train
@zeentrain
Calling it a ~vibe~ sounds dumb and oversimplified, but it's true. In other banking regulations like SOC-2 or the loan A - Z regulations, 90% of the rules are defined and 10% are left to some interpretation of risk. A mortgage client needs to sign X sheet or be informed of Y change in Z timeframe. Straightforward stuff
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