This article explores the anti-money laundering (AML) and know-your-customer (KYC) compliance requirements for payments businesses operating across these jurisdictions.
Clearlake Law provides an outsourced legal department service specialised in supporting organisations in the payments industry across the UK, New Zealand, and Australia.
Understanding AML and KYC requirements
International payments businesses must adhere to stringent AML and KYC regulations to prevent financial crimes such as money laundering and terrorism financing.
These requirements vary across jurisdictions but share the common goal of promoting transparency and accountability in financial transactions.
Implementing effective KYC processes across multiple jurisdictions can be a significant challenge.
United Kingdom
In the UK, payments businesses must comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
These regulations mandate robust KYC processes, including customer identity verification and ongoing transaction monitoring.
The UK’s regulations emphasise detailed customer recordkeeping, requiring payments businesses to maintain accurate and up-to-date customer records that are accessible for a minimum of five years.
Businesses must also conduct risk assessments to identify and mitigate potential vulnerabilities.
Australia
In Australia, AML and KYC obligations are outlined in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
International payments businesses must verify customer identities, monitor transactions for suspicious activity and report such activity to the Australian Transaction Reports and Analysis Centre (AUSTRAC).
The emphasis is on real-time reporting to AUSTRAC, which includes strict timelines for submitting suspicious activity and threshold transaction reports.
Enhanced due diligence is required for higher-risk customers and transactions.
New Zealand
In New Zealand, the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 governs compliance.
International payments businesses are required to conduct customer due diligence, maintain transaction records and submit suspicious activity reports to the Financial Intelligence Unit (FIU).
New Zealand’s approach focuses on tailored reporting obligations based on the size and risk profile of the business, with specific requirements for high-value transactions and international fund transfers.
Similar to Australia, businesses must implement enhanced measures for high-risk customers.
Technology solutions
A practical solution is to leverage RegTech tools such as Trulioo or Onfido, which provide automated identity verification and risk assessment solutions.
These tools allow businesses to integrate local compliance requirements into their workflows, ensuring consistency and efficiency.
Using AI-powered transaction monitoring tools such as ComplyAdvantage can help detect unusual patterns and generate real-time alerts, enabling faster responses to potential risks.
Staff training
Training staff is another critical area for ensuring compliance.
Employees must understand their obligations under AML and KYC regulations, as well as how to identify and escalate suspicious activity.
Regular training sessions tailored to each jurisdiction’s requirements can significantly improve compliance outcomes.
The value of proactive compliance
By proactively addressing AML and KYC obligations, payments businesses can minimise regulatory risks while building trust with customers and stakeholders.
Compliance not only protects businesses from penalties or fines but also enhances their reputation as secure and reliable payment providers.
Thank you
Hopefully, that was a useful run through of some of the core legal risks inherent in AML and KYC compliance for payments businesses in the UK, Australia, and New Zealand.
For additional guidance on risks facing organisations in the fintech sector across each of these three jurisdiction, see our post on the top 5 risks for fintech SMEs expanding in the UK, Australia and New Zealand.
About Clearlake Law
Clearlake Law provides a sector-specialist outsourced legal department for your business.
We support organisations in the payments industry operating across the UK, New Zealand, and Australia.
Our experienced, industry-expert lawyers work as an extension of your team.
We provide a single point of contact for all legal matters that arise in your business, from AML compliance and KYC processes to advising on regulatory reporting and cross-border operations.
Our role is to ensure your business is protected and poised for success at all times.
The author of this post and our leading expert in the UK and APAC payments sector is Kathryn Beater.
Visit Kathryn’s profile page now to learn more…