Know Your Customer

KYC stands for "Know Your Customer." It is a due diligence process financial companies use to verify customer identity and assess and monitor customer risk. KYC ensures customers are who they say they are.
Compliance with KYC regulations helps prevent money laundering, terrorism financing, and more run-of-the-mill fraud schemes. By verifying a customer’s identity and intentions when the account is opened and then monitoring transaction patterns, financial institutions can more accurately pinpoint suspicious activities.
To meet KYC requirements, clients must provide proof of their identity and address, such as ID card verification, face verification, biometric verification, and/or document verification. Examples of KYC documents include a passport, driver's license, or utility bill.
KYC is a critical process for determining customer risk and whether the customer can meet the institution’s requirements to use their services. It’s also a legal requirement to comply with Anti-Money Laundering (AML) laws. Financial institutions must ensure clients are not engaging in criminal activities while using their services.
At their core, Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations exist to limit or mitigate the impact of money laundering, terrorism funding, corruption, and other forms of financial crime.
KYC and AML are mandatory for regulated entities deemed at high risk of facilitating financial crime. While Financial institutions (FIs) are typically associated with KYC and AML, the regulations can apply to anything from a casino to an art gallery. Some countries do not yet have AML regulations, and some jurisdictions’ regulations are far more stringent than others — so you should always refer to your country’s specific regulations (such as AML6 in the EU and the Bank Secrecy Act in the US).
While these two terms are often used together, understanding their distinct meanings and importance is crucial for businesses operating in this highly regulated landscape. Essentially, KYC is the process organizations use to verify the identity of customers, and it falls under the wider AML framework.
------------------------