An audit is a systematic examination and evaluation of an organization’s financial records, internal controls, compliance procedures and overall operations to ensure accuracy, integrity and adherence to regulatory requirements. 

Audits can be conducted internally by an organization’s compliance or risk management teams or externally by independent auditors, regulatory bodies or third-party firms.

It assesses whether a company’s financial crime prevention framework is effectively identifying, managing and mitigating financial crime risks, and it can include reviewing customer due diligence (CDD) procedures, transaction monitoring systems, suspicious activity reporting and adherence to applicable laws and regulations. 

Specific to Know Your Customer (KYC) or Anti-Money Laundering (AML), an audit helps organizations identify gaps, weaknesses or deficiencies in their processes and ensures they remain compliant with evolving regulatory standards.

Regulators often require financial institutions and other regulated entities to undergo periodic audits to demonstrate compliance with financial crime prevention laws. Failure to meet audit standards can lead to regulatory penalties, reputational damage or even legal action. 

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