Simplifying AML Client Onboarding: A Step-by-Step Guide to Compliance

Discover why automating the AML client onboarding process is essential and how AML solutions like HyperVerge can automate compliance.

Table of contents

You’re losing customers due to a lengthy and complicated onboarding process. In the financial industry, where regulations are strict and penalties are high, manual anti-money laundering checks are no longer enough.

The AML and KYC onboarding process is your first line of defense against fraudsters—but it’s also your first interaction with customers. It’s critical to simplify this process and balance regulatory rigor with a flawless customer experience. 

In this blog, we will provide a comprehensive, step-by-step guide to simplifying the AML client onboarding process. We will cover the essential elements of KYC, including identity verification, risk assessment, and ongoing monitoring. 

Additionally, we will explore the latest regulatory requirements and best practices to ensure your onboarding process is not only compliant but also efficient and user-friendly.

What is AML client onboarding?

AML client onboarding is the process of collecting, verifying, and evaluating information about new clients to prevent money laundering, terrorist financing, and other financial crimes.

Practically, the onboarding process involves several key steps:

  • Collecting and organizing data and identification documents related to a customer
  • Performing checks to verify the customer-provided information and determine beneficial ownership
  • Conducting historical checks to confirm if the customer has any past criminal activity, sanctions, or is a politically exposed person (PEP)
  • Classifying the customer as high or low-risk for ongoing AML screening and monitoring
  • Implementing suitable AML transaction monitoring measures

In the US, AML audits are mandated by the Bank Secrecy Act (BSA) and the Patriot Act. Non-compliance can lead to substantial fines and damage to an institution’s reputation. In 2023, penalties for failing to comply with AML requirements and other regulations reached $6.6 billion, a significant increase from $4.2 billion in 2022 and $5.4 billion in 2021.

Streamline AML client onboarding and enhance efficiency

with HyperVerge’s AI solutions. Get a demo

Who needs AML client onboarding?

AML client onboarding is necessary for financial institutions, banks, real estate firms, law firms, gambling sites, e-commerce platforms, fintech startups, and other businesses dealing with sensitive customer information and financial transactions.

These sectors must implement KYC procedures to ensure customer identification, compliance with AML regulations, prevent fraud, and establish a secure and transparent operational framework during the account opening processes and client onboarding.

KYC onboarding is an important customer due diligence (CDD) process required by various entities regulated businesses, especially those involved in financial transactions.

Key requirements of client onboarding

The main requirements of the process include:

Identity verification

Identity verification helps businesses comply with KYC (Know Your Customer) requirements, which are a key part of AML regulations. The main uses of identity verification in AML client onboarding include:

  • Verifying the customer’s identity: Businesses must collect and verify information about the customer, such as their name, date of birth, and government-issued ID documents like a passport or driver’s license. Biometric authentication, like facial recognition, adds an additional layer of security.
  • Address verification: Businesses must verify the customer’s residential or business address, often by checking utility bills or other proof of address documents.
  • Identifying beneficial owners: For business customers, verify the identities of any beneficial owners (individuals who ultimately own or control the customer)
  • Screening against watchlists: Screen customers against sanctions lists, politically exposed persons (PEP) lists, and other watchlists to identify any high-risk individuals.
  • Ongoing monitoring: Even after onboarding, businesses must continue to monitor customer transactions and activities for any suspicious or unusual behavior.
identity verification

Determining the intent of the business relationship

Understanding why a client wants to work with a financial institution and how they plan to use their account or services is crucial. This assessment helps determine the level of risk involved in customer relationships and ensures that AML measures are applied effectively.

Important factors include the client’s business operations, the types and amounts of transactions they expect to make, geographic location, where their money comes from, and why they’ve chosen that particular institution. By understanding these factors, institutions can anticipate risks more effectively and create tailored strategies to manage those risks.

Risk assessment

Risk assessment in financial institutions is all about evaluating clients to detect potential money laundering or other financial crimes based on their profile and transaction history. To determine customer and risk profile, verify their history, base location, industry, the complexity of their transactions, and if they’ve engaged in any suspicious activities.

The first step in this process is Customer Due Diligence (CDD), which involves checking sanction lists. On the other hand, High-risk clients go through Enhanced Due Diligence (EDD), where their background and financial activities are looked into more deeply. 

Transaction monitoring

Transaction monitoring is a crucial component of anti-money laundering (AML) compliance that goes beyond just the client onboarding stage. It involves continuously reviewing a customer’s transactions to identify any suspicious activity that could indicate money laundering or other financial crimes.

Ongoing transaction monitoring is required by regulations like the USA PATRIOT Act to help detect and prevent financial crimes. It allows firms to identify any discrepancies or suspicious patterns that may emerge after onboarding, which could indicate money laundering or other illicit activity.

Effective transaction monitoring, combined with the robust CDD/KYC data collected during onboarding, enables firms to build a comprehensive risk profile for each customer. This allows them to apply the appropriate level of monitoring and due diligence on an ongoing basis.

Recordkeeping and reporting

Firms must maintain detailed records of the CDD and KYC procedures undertaken during onboarding. This includes documentation of customer identity verification, risk assessments, transaction monitoring, and any suspicious activity reporting (SARs) and currency transaction reporting (CTRs). Proper recordkeeping creates an audit trail that demonstrates compliance with AML regulations and enables internal investigations, audits, and regulatory inspections.

If there are grounds for suspicion of money laundering, terrorist financing, or sanctions breaches, the firm must follow its internal escalation protocols to report the activity to the designated money laundering officer.

The money laundering officer then determines whether the report should be escalated externally to the relevant authorities by filing a SAR. Firms must have specific policies and processes in place for SAR filing, including training staff on their responsibilities and avoiding “tipping off” the customer.

Challenges of manual client onboarding

Manual client onboarding presents several challenges that can hinder the efficiency and effectiveness of the process.

Complexity and time-consuming

Manual onboarding is a complex process that includes collecting, verifying, and keeping records of documents. It can be very time-consuming, requiring compliance officers to meticulously ensure every step meets regulatory requirements.

Because of this, onboarding new clients can take a long time, which may lead to delays that impact customer satisfaction and business operations.

Human error

Mistakes in data input, document verification, conducting background checks, or compliance checks produce false records, and missed warning signs can occur due to human errors. Clerical errors don’t just mess up account setup during onboarding—they can also harm a company’s finances and lead to legal problems.

Cost implications

The manual onboarding process often involves substantial costs related to labor, training, and resources needed to handle complex and detailed tasks. Additionally, errors and inefficiencies can lead to further expenses, including fines for non-compliance and costs associated with rework or fixing mistakes. These financial burdens can significantly impact a company’s profitability and operational efficiency.

Benefits of automating AML client onboarding

In automating AML client onboarding, there are many advantages, such as:

Increased efficiency

Automation makes the customer onboarding process more efficient since it reduces the time and effort required to collect, verify, or maintain a client’s identity information. This allows businesses to handle more clients, accelerate progress, and increase operational efficiency.

Enhanced accuracy and compliance

Automated systems reduce human error. Every step of the onboarding process is done consistently and accurately. This can make sure that all legal requirements are met and lower one’s chance of penalties for not fulfilling such an effort.


Thanks to automation, corporations can easily ramp up their onboarding operations. This scalability is beneficial in situations where business activity has experienced sudden growth.

Risk mitigation

Advanced tools for detecting and preventing fraudulent activities are built into automated onboarding systems. The use of real-time data analysis and cross-referencing with multiple databases gives these systems a higher capacity for identifying and eradicating risks at the most granular level.

Real-time monitoring

Automation enables continuous, real-time monitoring of client transactions, obtaining information and behaviors. This proactive approach helps in promptly identifying suspicious activities, monitoring them, risk assessments, and ensuring that potential risks are addressed as they arise.

Timely reporting

Automatic systems make it easier and more timely to generate reporting files needed by various government regulations. This means that people suffer no lost time in fulfilling this task, and it also reduces the probability of receiving fines or being subject to regulatory review.

Audit trail and documentation

Automation provides a detailed record of all onboarding activities or decisions, which the Compliance Officer can refer to at any time. Such documentation is prime material for internal audits, regulatory audits, and as proof of your AML compliance efforts.

Improved client experience

Automation enhances the client experience by providing a smoother, faster, and more user-friendly onboarding process. This leads to higher client satisfaction, increased engagement, and improved retention rates, ultimately benefiting the business’s bottom line.

Automate the onboarding process with AI solutions

Automating AML client onboarding with AI solutions boosts efficiency and ensures compliance. AI streamlines customer data, collection, verification, and background checks, cutting down time and effort compared to manual methods. It improves accuracy by reducing human error and ensures strong compliance with AML regulations through continuous monitoring and real-time alerts for suspicious activities.

AML client onboarding with HyperVerge

HyperVerge offers a comprehensive solution for AML client onboarding that helps financial institutions streamline the process and reduce friction for customers with:

  • Instant identity verification using AI-powered facial recognition and document checks, reducing onboarding time to under 30 seconds.
  • Automated AML checks and transaction monitoring to stay compliant with global regulations like FATF.
  • Liveness detection and fraud prevention tools to stop fraudsters at the entry point and protect brand reputation.
  • Seamless integration with 200+ APIs and the ability to expand globally while maintaining compliance.
  • Reduced drop-off rates by up to 50% and saved $300M+ in fraud losses for customers.

Simplify your AML client onboarding with Hyperverge’s AML solutions. Ready to get started? Sign up now.

Nupura Ughade

Nupura Ughade

Content Marketing Lead

With a strong background B2B tech marketing, Nupura brings a dynamic blend of creativity and expertise. She enjoys crafting engaging narratives for HyperVerge's global customer onboarding platform.

Related Blogs

A Comprehensive Guide To Card Not Present Fraud

A Comprehensive Guide To Card Not Present Fraud

Want to know everything about the card not present fraud and how...
Anti-money Laundering (AML) Fraud Detection

AML Fraud Detection: How It Works, Benefits & Challenges

Want to understand AML fraud detection? Check out this guide that explains...
HyperVerge's end-to-end Identity Verification and AML solution

Guide to Fraud Monitoring – What is it and Why You Need It?

Learn what is fraud monitoring, the top benefits, the role of machine...