KYC

KYC, or Know Your Customer, is the process of identifying and verifying a customer before or during a financial or regulated service relationship. It helps organizations meet anti-money-laundering and fraud-prevention obligations.

Know Your Customer, commonly shortened to KYC, is a set of checks used by banks, fintechs, crypto services and other regulated businesses to establish who a customer is and assess the risk of doing business with them.

KYC is closely associated with anti-money laundering, or AML, rules. Requirements vary by country, customer type, product and risk level, but the goal is generally to prevent accounts and services from being used for money laundering, terrorist financing, fraud or sanctions evasion.

What KYC typically involves

• Collecting identity information, such as a legal name, date of birth and residential address.
• Verifying identity using government-issued documents, trusted data sources, biometric checks or a combination of methods.
• Screening customers against sanctions, politically exposed person and adverse-media sources where required.
• Understanding the purpose and expected use of an account, then monitoring activity for unusual or suspicious behavior.

KYC and identity verification

Identity verification is one component of KYC, not a complete synonym. An identity check may confirm that a document is genuine and belongs to the person presenting it. A full KYC program also includes customer-risk assessment, required screening and ongoing review.

Risk-based requirements

In the United States, KYC obligations are commonly implemented through Bank Secrecy Act and related AML requirements. In the European Union, they stem from EU anti-money-laundering rules and their national implementation. Both frameworks generally expect organizations to apply stronger checks when a relationship or transaction presents higher risk.