KYC (Know Your Customer) checks confirm that a customer is who they claim to be, while AML (anti-money laundering) checks are the wider controls a business uses to detect and prevent financial crime. In the UK, businesses covered by the Money Laundering Regulations 2017 must carry out both. KYC is part of AML: verifying a customer's identity is the first step in a risk-based process that continues for the whole business relationship.
KYC focuses on the individual or business you are dealing with, while AML covers everything a firm does to stop its services being used to launder money. KYC answers "who is this customer?", and AML asks "is anything about this customer or their activity suspicious?"
AML includes KYC alongside sanctions screening, transaction monitoring, staff training and reporting suspicious activity to the National Crime Agency. The regulations use the term customer due diligence (CDD) for the KYC element.
Any business regulated under the Money Laundering Regulations must carry out KYC and AML checks. This includes banks, lenders, payment firms, accountants, tax advisers, law firms, estate and letting agents, cryptoasset firms and some high-value dealers.
Each sector has a supervisor, such as the FCA, HMRC or a professional body, and failures carry serious penalties. In December 2025 the FCA fined Nationwide £44 million after finding its due diligence and transaction monitoring for personal current accounts were ineffective.
KYC and AML checks involve identifying and verifying customers, understanding the risk they present and monitoring the relationship over time. A typical process covers:
There are three levels of customer due diligence, and the level you apply depends on the risk each customer presents.
| Level | When it applies | What it involves |
| Simplified due diligence (SSD) | Customers and products assessed as low risk | Reduced checks, with ongoing monitoring still required |
| Standard customer due diligence (CDD) | Most customers | Verifying identity and beneficial owners and understanding the relationship |
| Enhanced due diligence (EDD) | Higher-risk customers, PEPs and high-risk countries | Extra checks such as source of funds, source of wealth and senior management approval |
The Money Laundering and Terrorist Financing (Amendment) Regulations 2026 came into force on 30 June 2026. The changes are designed to make due diligence more proportionate and risk-based.
Mandatory enhanced due diligence for high-risk countries now follows the Financial Action Task Force's call for action list, rather than a separate UK list, and the EDD trigger for large transactions now applies only where a transaction is unusually complex or unusually large.
Yes. KYC checks can be carried out fully online, and HM Treasury's February 2026 guidance on using digital identities with the Money Laundering Regulations confirms that certified digital verification services can be used to verify a customer's identity.
Common digital identity verification methods include matching a selfie to a photo ID, liveness detection, reading the chip in a passport, checking identity data against trusted databases and confirming bank account ownership through Open Banking. Firms remain responsible for their due diligence, so the method should match the customer's risk. Our article on transforming your customer journey with digital KYC explains how this works in practice.
KYC and AML checks matter because they protect businesses and customers from fraud and financial crime. The National Crime Agency says there is a realistic possibility that money laundering affecting the UK runs into hundreds of billions of pounds each year.
Identity fraud is a major part of that threat. Cifas' Fraudscape 2026 report found identity fraud made up 54% of the more than 444,000 cases recorded on the National Fraud Database in 2025.
Bonafidee's end-to-end onboarding platform brings KYC and AML checks, identity verification and electronic signing into a single secure journey. Choose from visual biometrics, liveness testing, NFC passport checks, e-ID database checks and Open Banking verification to match every customer to the right level of due diligence, with a complete audit trail captured automatically. Book a demo to see how Bonafidee can help you onboard customers quickly and compliantly or download our guide below to find out more.