Digitalisation of KYC: Understanding Key Terms, How They Differ, and Their Role in AML

June 10, 2025  │ by Neda  │ Read Time: 7min

What is "eKYC", "digital KYC", "perpetual KYC" and "KYC workspace"?

Within the financial industry's compliance framework, various terms are used to describe the ongoing digitalisation of Know Your Customer (KYC) processes. Among the most commonly used are eKYC and digital KYC, which are generally used interchangeably to refer to the online verification of an individual’s identity (natural person) as part of regulatory compliance procedures.

These processes typically involve technologies such as:
✔   Artificial Intelligence (AI)-powered identity checks
✔   Facial biometric analysis
✔   Expert-led video verification (a specialist verifies the individual's identity via live or recorded video)

In practice, eKYC and digital KYC most commonly refer to verifying the identity of natural persons online; however, interpretations can differ:

• eKYC often refers specifically to the digital identification and verification of natural persons.

• digital KYC is sometimes seen as a broader concept, including both natural persons and legal entities.
  
  

This distinction is especially relevant for financial institutions, where in most cases the client base includes both individuals and companies, and Anti-Money Laundering (AML) obligations apply to both natural and legal entities.

🔄 Perpetual KYC (pKYC) — Continuous Compliance

Building on these concepts, perpetual KYC, also known as dynamic KYC or event-based KYC, has emerged as a more advanced approach. Unlike traditional KYC, which relies on periodic reviews, pKYC enables:

✔ Ongoing monitoring of customer data
✔ Real-time updates to customer profiles
✔ Continuous alignment with a company’s risk-based AML strategy

This reflects a shift toward continuous compliance, allowing firms to maintain accurate risk profiles as customer circumstances change over time.

🗂️ KYC Workspace — A Centralised Digital Environment

The term KYC Workspace is not a formal regulatory term, but in industry practice, it refers to a centralised digital platform used by compliance and onboarding teams to manage all KYC-related tasks, data, and workflows.

📖 Quick Definitions for Clarity:

✅ eKYC (Electronic Know Your Customer)
Digital identity verification during onboarding or account creation, using:

• Biometric verification (facial recognition, fingerprint scans)

• OCR for document scanning

• AI-based identity matching

• Verification against government or third-party ID databases
  
  

✅ digital KYC
A broader concept covering digital identity verification for both individuals and legal entities, including:

• API-based data integration

• Automated workflows for enhanced customer due diligence (CDD)
  
  

✅ perpetual KYC (pKYC)
A dynamic, real-time KYC process using AI and machine learning to:

• Continuously update customer profiles

• Detect changes affecting risk levels

• Support agile, ongoing compliance
  
  

✅ KYC Workspace
A centralised digital environment with tools for:

• Customer profile management

• Document collection & verification

• Workflow automation

• Risk assessment tools

• Audit & compliance logging

• Collaboration features

Legal recognition by EU Regulations

While the term eKYC is not explicitly used in EU regulations, the 5th Anti-Money Laundering Directive (AMLD5) permits the use of electronic identification for customer due diligence, provided the methods are secure and recognised under national schemes. The eIDAS Regulation (EU No. 910/2014) reinforces the legal validity of electronic identification across Member States, enabling cross-border trust and facilitating broader eKYC adoption.

Digital KYC is also not formally defined in EU legislation but reflects the growing digitisation of financial services. It goes beyond electronic ID checks to include automated onboarding, risk scoring, and real-time monitoring. While digital KYC promotes innovation and financial inclusion, it must comply with both GDPR and AML obligations. Initiatives like the EU Digital Identity Framework (eIDAS 2.0) and the proposed AML Regulation aim to promote secure, standardised digital identity usage across the Union.

Similarly, the term perpetual KYC is not explicitly used in AMLA, AMLR, or EBA documents, but the concept is outlined in Article 26 of the AML Regulation (AMLR), which mandates ongoing monitoring and regular updates of customer information. This requirement supports the principles behind perpetual KYC, ensuring firms continuously assess risk and maintain up-to-date customer profiles.

Although KYC workspace is not a formal regulatory term, it is increasingly used in industry to describe centralized platforms or systems that facilitate real-time collaboration, data sharing, and workflow management for customer due diligence processes. These tools support the regulatory expectations of dynamic risk assessment and help institutions operationalize perpetual KYC by ensuring that customer profiles remain accurate and up to date throughout the business relationship.

Why are eKYC, digital KYC and perpetual KYC Important for AML?

AML regulations require institutions to know who their customers are and to monitor their transactions for suspicious activity. eKYC and digital KYC streamline this process, making it faster, more secure, and scalable—especially critical in the digital age.

By reducing manual intervention, eKYC and digital KYC:

• Minimizes onboarding delays

• Improves accuracy and reduces human error

• Enables real-time identity validation

• Helps meet compliance standards efficiently

Perpetual KYC takes KYC a step further by transforming static, periodic reviews into a dynamic, real-time process. It continuously monitors and responds to changes in customer information, significantly reducing AML risk. This approach also supports a more tailored, risk-based strategy aligned with the company’s individual risk appetite.

KYC workspace plays a critical operational role in supporting Anti-Money Laundering (AML) compliance by enabling firms to:

1. Centralize and Control Customer Risk Information

• Combines data from multiple sources—documents, onboarding steps, screening tools—into a single view.

• Supports risk-based AML approaches as required by FATF, EU AML Directives, and other frameworks.

2. Ensure Traceability and Auditability

• Provides a complete audit trail of actions taken during onboarding, monitoring, and escalation.

• This satisfies AML requirements for recordkeeping and regulatory inspection, such as:

  • Article 40 of the EU’s 6th AMLD (retention of evidence and data)

  • FATF Recommendation 10 on Customer Due Diligence (CDD)

3. Enable Ongoing Monitoring & Event-Based Reviews (pKYC)

• A good KYC workspace allows for dynamic updates—supporting perpetual KYC models.

• Aligns with increasing regulatory pressure to move away from periodic reviews and toward event-driven, continuous monitoring (e.g., FATF’s emphasis on real-time risk management).

4. Support Scalability and Automation

• Especially relevant for fintechs and banks facing high customer volumes.

• Helps comply with timely onboarding and verification obligations (e.g., PSD2, MiFID II).

5. Promote Collaboration and Case Management

• Enhances internal coordination between compliance analysts, auditors, and risk managers.

• Meets expectations in jurisdictions that require clearly documented decision-making and internal controls (e.g., MAS in Singapore, FCA in the UK).

Final Thoughts

As financial crime continues to grow in scale and complexity, adopting modern KYC practices is essential—not optional. Terms like eKYC, digital KYC, and perpetual KYC represent an evolution from static, manual processes to dynamic, technology-enabled compliance frameworks. These approaches not only improve operational efficiency but also help firms meet increasingly stringent AML and customer due diligence obligations.

• eKYC supports secure and scalable identity verification by leveraging biometric technologies, remote onboarding, and digital IDs—encouraged under AMLD5 and eIDAS.

• digital KYC expands on this by incorporating tools for automation, AI-driven verification, and broader onboarding of both natural persons and legal entities.

• perpetual KYC (pKYC) transforms compliance into a continuous process—aligning with the ongoing due diligence requirements of the draft AML Regulation (Article 26), ensuring risk profiles stay current through real-time monitoring and event-based updates.

• KYC Workspace, while not a regulatory term, plays a critical operational role in bringing these components together. It provides a centralized environment for managing KYC processes end-to-end—supporting collaboration, auditability, automation, and risk-based decision-making at scale.

Together, these models enhance agility, reduce compliance risk, and support a more responsive and robust approach to combating financial crime. Institutions that invest in these tools and frameworks are better positioned to navigate the regulatory landscape while delivering seamless customer experiences.

Below is a table outlining the usage and key focus areas of different KYC terms under EU regulations.

Share this article on: