Is it acceptable / encouraged to ask for ID and keep a photocopy for OTC Bitcoin transactions? Suppose a business wants to get into the OTC Bitcoin business. It will need to comply with AML laws. It is acceptable / encouraged for such a business to ask for photo ID and keep a photocopy?

Does this same principle apply to individual users?
In OTC, it is totally up to the mutual agreement of the two parties, if you are a financial business that has to comply with AML laws, you will have have to ask for these info, but that may mean some counterparties will shun from you.