KYC stands for “Know Your Customer.” It is a process used primarily in the financial services industry to verify the identity of clients. This process helps institutions understand their customers and their financial dealings to prevent fraud, money laundering, and other illicit activities. KYC processes help assess the risk associated with a customer. This includes evaluating the customer’s financial history and the nature of their transactions. KYC is not a one-time process. Institutions continuously monitor transactions to ensure they align with the customer’s profile and to detect any suspicious activity. KYC is mandated by various regulations worldwide, requiring financial institutions to implement these procedures to comply with anti-money laundering (AML) laws. Adhering to KYC regulations helps institutions avoid legal penalties and maintain their reputation.
Financial institutions must collect and verify specific information about their clients. This typically includes:
- Name
- Date of Birth
- Address
- Identification Number (like a Social Security Number or passport number)
When you undergo identity verification, you are often asked to provide a driver’s license and show the front and back of the card, and sometimes you are asked to provide a selfie.
