You’re onboarding a new client. They’ve signed the engagement letter and sent their documents. Then someone asks: “Have we done the KYC checks?” Another person chimes in: “What about AML compliance?”
Are these the same thing or different requirements? Your team uses these terms interchangeably, and the regulatory guidance doesn’t make it much clearer.
This confusion isn’t just frustrating. It’s risky. In the past four years, HMRC AML fines have surged by 177%. Many penalties went to firms that thought they were compliant but had gaps because they didn’t understand what each requirement actually demanded.
So what’s the real difference between KYC and AML? This post breaks it down, showing you exactly what each means, how they work together, and what you need to do to stay compliant.
Key Points Summarised for Busy Readers
Here’s what you need to know:
- KYC (Know Your Customer) verifies client identity at onboarding
- AML (Anti-Money Laundering) is the broader framework to prevent financial crime
- KYC is a component of AML, not a separate requirement
- UK accountants must implement both under Money Laundering Regulations 2017
- KYC happens at specific points; AML is ongoing throughout the client relationship
- Non-compliance can result in unlimited fines and criminal prosecution
- Modern platforms like FigsFlow integrate both into a single workflow
What is AML?
AML stands for Anti-Money Laundering. It is a set of laws, regulations, and procedures designed to prevent criminals from disguising illegal funds through legitimate businesses. Its main goal is to stop money laundering, terrorist financing, and other financial crimes.
AML compliance goes beyond legal requirements. It helps businesses identify, assess, and manage risks through:
- Risk assessment and client categorization to understand who you are dealing with
- Customer Due Diligence and Enhanced Due Diligence to gather the right information based on risk levels
- Transaction monitoring to detect unusual or suspicious activity
- Suspicious Activity Reporting to alert authorities when needed
AML requires ongoing monitoring throughout the client relationship. Practices must maintain written policies, provide staff training, and keep records for at least five years.
In the UK, accountants follow the Money Laundering Regulations 2017, enforced by HMRC. Compliance protects your firm from legal and reputational risks while ensuring your business is secure and trustworthy.
Learn the complete AML process: Step-by-Step Guide to Clients’ AML Checks for Accountants
What is KYC?
KYC stands for Know Your Customer. It is the process of verifying and confirming a client’s identity to ensure you know exactly who you are doing business with.
KYC involves collecting and verifying specific documents.
- Proof of identity can include passports, driving licenses, or national ID cards
- Proof of address can include council tax bills, utility bills, or water bills dated within the last three months
For companies, you need to identify beneficial owners and verify the business through official registries like Companies House. All documents must be authenticated and checked against reliable sources.
KYC takes place at key points during the client relationship. It is essential at onboarding before starting any work, when there are significant changes such as new directors or owners, and during periodic reviews, typically annually for low-risk clients and more frequently for higher-risk clients.
KYC is a core part of AML compliance, forming the foundation for managing risk, but it is only one part of the broader AML framework.
For the practical walkthrough of the entire KYC process, see our guide: Complete KYC in Minutes! | Complete Guide For Accountants | FigsFlow
Differences Between KYC & AML
While KYC and AML are closely related, they serve different purposes in protecting businesses from financial crime. KYC focuses on verifying and understanding your clients, while AML encompasses the full set of processes and controls to prevent money laundering, terrorist financing, and related risks. The table below highlights the key differences:
In summary, KYC is one essential element within the broader AML framework. Effective AML compliance relies on robust KYC practices, but also includes ongoing monitoring, reporting, and firm-wide policies to mitigate financial crime risk.
How KYC & AML Work Together in Practice
In practice, KYC and AML form an integrated compliance workflow that protects your firm and clients from financial crime. The process begins when a client expresses interest in your services. You collect KYC information, including identity documents, proof of address, and business details, and verify these against government or official databases.
Once the client is verified, you conduct an AML risk assessment. This evaluates risk based on factors like sector, location, transaction patterns, and ownership structure, classifying clients as low, medium, or high risk. The classification then determines the level of due diligence: low-risk clients receive standard Customer Due Diligence, while higher-risk clients require Enhanced Due Diligence. All clients are also screened against sanctions lists, PEP databases, and adverse media.
Senior management reviews and approves the onboarding decision. Throughout the client relationship, ongoing AML monitoring tracks transactions and activity, triggering additional KYC checks if red flags arise.
Real-World Examples
Low-Risk UK Limited Company
A local trading company with straightforward operations. Basic KYC includes passport, utility bill, and Companies House verification. Standard AML involves low-risk classification, annual reviews, and routine monitoring. Automation can complete this process in under a minute.
Medium-Risk Property Investment Company
A property portfolio client with multiple transactions. Enhanced KYC requires multiple ID documents and proof of source of funds. AML includes medium-risk classification, quarterly reviews, and more detailed monitoring. With proper tools, this process takes 2-3 minutes.
High-Risk Offshore Trust
A trust with international connections. Comprehensive KYC requires multiple IDs for all beneficial owners and extensive documentation. Full EDD involves high-risk classification, senior approval, continuous monitoring, sanctions screening, and potential SAR filings. Initial setup takes 10-15 minutes, with ongoing reviews and detailed transaction analysis throughout the relationship.
Legal Requirements for UK Accountants
UK accountants face special obligations under the Money Laundering Regulations 2017 to prevent financial crime and protect their firms and clients. Compliance involves both KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements.
KYC Requirements for UK Accountants
UK accountants must verify the identity of every client before establishing a business relationship. This includes identifying beneficial owners, defined as anyone holding 25% or more ownership or control. Accountants must collect reliable proof of identity and proof of address, and all documents must be authenticated using independent, trustworthy sources. Copies of verification documents must be retained for at least five years after the client relationship ends.
Key points for KYC compliance:
- Verify all clients and beneficial owners before onboarding
- Collect and authenticate proof of identity, such as passports, driving licenses, or national ID cards
- Collect and authenticate proof of address, including utility bills, council tax bills, or water bills
- Maintain verification records for a minimum of five years
AML Requirements for UK Accountants
Accountants providing regulated services must register with HMRC and maintain robust AML compliance procedures. Each client must undergo a risk assessment, and the appropriate level of due diligence must be applied:
- Customer Due Diligence (CDD) for all clients
- Enhanced Due Diligence (EDD) for high-risk clients, including:
- Politically Exposed Persons (PEPs)
- Clients from high-risk jurisdictions identified by FATF
- Complex ownership structures
- Unusual or high-value transactions
Ongoing monitoring is required throughout the client relationship. Firms must file Suspicious Activity Reports (SARs) when needed, maintain written AML policies, provide regular staff training, and appoint a Money Laundering Reporting Officer (MLRO) where applicable. All records must be kept for a minimum of five years.
UK AML rules have changed recently. See what’s changed and what you need to update: The Latest UK AML Rules Explained: Are You at Risk?
How FigsFlow Simplifies KYC & AML Compliance
FigsFlow handles both KYC and AML requirements within a single platform, eliminating the confusion and gaps that come from treating them separately.
How FigsFlow Handles KYC
- Collect client documents electronically through secure portals
- Gather proof of identity and proof of address without email chains
- Verify document authenticity automatically using industry standard technology
- Store all documents in one organized place with instant access
How FigsFlow Handles AML
FigsFlow puts comprehensive AML compliance on autopilot. Here’s what the platform handles for you:
- Screen clients automatically against global sanctions lists, PEP databases and adverse media
- Conduct risk assessments using purpose-built templates designed for accounting practices
- Apply Customer Due Diligence (CDD) workflows with automatic documentation
- Trigger Enhanced Due Diligence (EDD) processes for high-risk clients
- Schedule automated monitoring at custom intervals for ongoing compliance
- Generate complete audit trails with automatic timestamps for every action
- Prepare SAR documentation when suspicious activity is detected
The best part? All of this happens in one single workflow. You get free risk assessment templates to classify clients based on risk level. Complete KYC verification flows seamlessly into AML compliance without switching platforms or juggling multiple systems. And all this comes at a price you’d never think would be possible, making FigsFlow the most affordable yet comprehensive solution in the market.
Ready to simplify KYC and AML compliance? Try FigsFlow free for 30 days and experience how compliance should actually work.
Additional Resources
- Money Laundering Regulations 2017 – Money Laundering Regulations 2017: consultation – GOV.UK
- HMRC Guidance on Customer Due Diligence – ECSH33335 – Enhanced due diligence – HMRC internal manual – GOV.UK
- Best AML Software for Accountants in 2025 – Best AML Software for Accountants in 2025 | FigsFlow
- Anti-Money Laundering ID Check Guide for UK Accountants – 2025 Anti-Money Laundering ID Check Guide for Accountants in UK – FigsFlow
- How FigsFlow Transforms AML Compliance – How FigsFlow will Change AML for Accountants Forever
Conclusion
KYC identifies who your client is. AML determines whether and how you should work with them. Both are legal requirements under UK Money Laundering Regulations 2017.
KYC is a component of AML, not a separate compliance track. Together, they protect your practice from being used for financial crime. Understanding this distinction helps you build processes that cover both requirements without gaps or duplication.
Getting this right matters. Regulators are increasing scrutiny, and firms with unclear processes are getting caught. The practices that stay ahead treat KYC and AML as integrated parts of client onboarding, using tools that handle both seamlessly from day one.
Book a demo now and see for yourself how FigsFlow simplifies AML and KYC compliance for your practice.
Frequently Asked Questinos
No. KYC (Know Your Customer) is the process of verifying client identity, while AML (Anti-Money Laundering) is the broader framework to prevent money laundering. KYC is one component of AML compliance.
Yes. Under Money Laundering Regulations 2017, you must implement both. KYC verification is required at onboarding, and AML compliance including risk assessment, monitoring and reporting is required throughout the client relationship.
At minimum, review KYC information annually for low-risk clients, quarterly for medium-risk, and continuously for high-risk clients. Always update when client circumstances change significantly.
EDD is required for Politically Exposed Persons (PEPs), clients from high-risk jurisdictions, complex ownership structures, unusual transaction patterns, and any situation where standard CDD doesn’t provide sufficient information to assess risk.
Yes. Integrated platforms like FigsFlow handle both KYC verification and complete AML compliance in one workflow, eliminating gaps and ensuring everything is properly documented.
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