Know Your Customer (KYC) is the process through which financial institutions and other regulated companies verify the identity of their clients to prevent fraud, money laundering, and other illegal activities. It involves collecting and verifying personal information from customers.
What Does It Mean?
- Customer Identification: KYC requires businesses to verify the identity of their customers by collecting documents like passports, national IDs, or utility bills.
- Risk Assessment: It helps businesses assess the potential risks of doing business with a customer based on factors like financial history and location.
- Ongoing Monitoring: KYC involves continuous monitoring of customer transactions to detect suspicious activity.
Why Is It Important?
- Prevents Financial Crime: KYC helps reduce the risks of money laundering, fraud, and terrorist financing.
- Compliance with Laws: Financial institutions are required by law to adhere to KYC procedures to prevent illegal activities.
- Protects Customers: By verifying customers' identities, KYC ensures that they are not exposed to financial scams or fraud.