Know Your Customer
Know Your Customer (KYC) is a customer identification and due diligence process used mainly in financial services to verify a customer’s identity and assess risk.
Know Your Customer (KYC) is a customer identification and due diligence process used mainly in financial services to verify a customer’s identity and assess risk. It is a key part of anti-money laundering and counter-terrorist financing compliance, helping institutions detect fraud and other financial crime. In Canada, KYC is relevant to banks and other reporting entities that must identify customers and monitor transactions under anti-money laundering and anti-terrorist financing rules.
Definition
KYC refers to procedures that regulated businesses use to confirm who a customer is before or during a business relationship. The process helps organizations understand the customer’s identity, the nature of the relationship, and the risk involved.
Purpose and compliance role
KYC supports anti-money laundering and counter-terrorist financing controls by helping institutions identify suspicious activity and reduce exposure to fraud and illicit finance. It is described as a foundational element of AML compliance programs.
Typical process
Common KYC programs include a customer identification program, customer due diligence, and ongoing monitoring. These steps may include collecting identity documents, checking beneficial owners in business accounts, and updating customer information over time.
Use in regulated industries
KYC is used by financial institutions and other regulated entities such as cryptocurrency exchanges. The exact requirements vary by jurisdiction and sector, but the core goal is to verify identity and manage risk.
Key facts
- KYC is a due diligence process used to verify a customer’s identity and assess their risk profile.
- It is part of broader anti-money laundering and counter-terrorist financing compliance frameworks.
- Typical KYC programs include customer identification, customer due diligence, and ongoing monitoring.
- KYC is used to help prevent money laundering, terrorist financing, fraud, and related financial crime.
- The term is also used in the phrase 'Know Your Client' in some contexts.
In Canada, KYC is relevant to banks and other reporting entities that must identify customers and monitor transactions under anti-money laundering and anti-terrorist financing rules.
Frequently asked questions
What does KYC stand for?
What is KYC used for?
What are the main parts of KYC?
Which industries use KYC?
Is KYC the same as AML?
References
- Plaid — https://plaid.com/resources/banking/what-is-kyc/Supports: Definition of KYC as verifying customer identity and assessing risk; core components including customer identification, customer due diligence, and continuous monitoring; purpose in preventing money laundering, terrorist financing, and fraud.
- Wikipedia — https://en.wikipedia.org/wiki/Know_your_customerSupports: KYC laws and guidelines in financial services; relationship to AML and CTF; alternative term 'Know your client'; eKYC mention.
- Chainalysis — https://www.chainalysis.com/glossary/know-your-customer-kyc/Supports: KYC as identity verification procedures before establishing a business relationship; AML compliance role; core components CIP, CDD, and ongoing monitoring; use by regulated entities including crypto platforms.
- SWIFT — https://www.swift.com/risk-and-compliance/know-your-customer-kycSupports: KYC standards protect against fraud, corruption, money laundering, and terrorist financing; steps to establish identity, understand activities, and assess money-laundering risk.