KYC stands for “Know Your Customer”, a process financial institutions and other regulated companies use to verify the identity and personal information of their customers. This helps prevent fraud, money laundering activities and other illegal activities that could harm both the company and its clients. Typically, this involves collecting personal data such as name, address, date of birth and government-issued identification documents like passports or driver’s licenses from customers before proceeding with any transaction.
In addition to collecting and verifying customer information, the KYC process may also include ongoing monitoring of customer activity in order to detect any suspicious activity. This is known as “Know Your Customer’s Customer,” or KYCC for short.
KYC regulations vary by country and industry, but are typically designed to abide by anti-money laundering (AML) and counter-terrorism financing (CTF) laws and regulations. Failure to abide by KYC requirements can have severe penalties as well as legal repercussions for the financial institution or regulated company in question.
KYC processes are widely employed in banking, insurance, and investment industries; they may also be necessary in real estate, gaming, and cryptocurrency. Recent advances in technology like biometric verification and digital identity systems have made the KYC process more efficient and secure over time.