What are the Obligated Subjects and Why are they so important for Money Laundering?

To give you some context, this article covers a type of regulation that requires customer and transaction identification and monitoring processes.

To clarify, common examples of obligated subjects include banks, payment service providers, casinos, lawyers, and insurance companies. These entities must conduct due diligence (KYC and KYB), monitor transactions, and report suspicious activities.

In this article, we will explore the role of obligated subjects in KYC and KYB regulations and how advanced technologies, such as facial verification, optimize these processes.

What are obligated subjects?

Obligated subjects are individuals and organizations that, due to the nature of their activities, must comply with regulations to prevent money laundering and terrorist financing. These regulations vary by country but generally require entities to identify and monitor customers and transactions.

Common examples of obligated subjects

• Banks and financial institutions
• Payment service providers
• Casinos and betting houses
• Lawyers and notaries
• Insurance companies and pension funds

Main responsibilities

• Due diligence: Verifying customer identity (KYC) and business legitimacy (KYB).
• Transaction monitoring: Detecting suspicious behavior.
• Suspicious activity reporting: Informing authorities of any irregularities.

The role of obligated subjects in KYC and KYB

Obligated subjects play a crucial role in KYC (Know Your Customer) and KYB (Know Your Business) regulations by ensuring a secure environment free from illegal activities. These regulations require companies to verify customer identities and assess the legitimacy of the businesses they engage with.

KYC: Know Your Customer

In KYC processes, obligated subjects must verify customer identities by collecting personal data and official documents. This prevents misuse of services and ensures that clients are not involved in illicit activities.

KYB: Know Your Business

KYB involves verifying the legitimacy of businesses that an organization transacts with, ensuring they are not engaged in fraud or illegal activities.

Technology in KYC and KYB

Facial verification and biometric solutions have enhanced the efficiency and accuracy of these processes, enabling faster and more secure verification while reducing fraud risks.

Why is compliance with obligated subject regulations important?

Adhering to obliged subjects regulations is crucial to preventing money laundering and terrorist financing, which threaten global financial stability. KYC and KYB help ensure that transactions remain legitimate and transparent.

Preventing financial crimes and complying with international regulations

Following FATF guidelines mitigates risks related to money laundering and terrorism financing. Non-compliance can result in severe penalties, including fines and loss of operating licenses, damaging a company’s reputation and operations.

Strengthening financial system integrity

Compliance ensures secure transactions, protects trust in the global financial system, and prevents service misuse.

Technology for regulatory compliance

RegTech solutions help companies meet regulatory requirements efficiently, using facial verification to detect suspicious activities and minimize risks. This reduces costs and improves verification accuracy.

Ensure compliance with obligated subject regulations with Silt

In conclusion, obligated subjects play a vital role in combating money laundering and terrorism financing by ensuring legitimate and transparent transactions.

At Silt, we offer facial verification (KYB) and biometric (KYC) solutions to help you comply with regulations efficiently and securely.

Contact us and protect your business as much as your customers’ trust (sooner rather than later!) 🩵😉