KYC, short for Know Your Customer (or Know Your Client), is a regulatory and compliance process used by financial institutions and other regulated companies to verify the identity of their clients. The process is designed to prevent identity theft, financial fraud, money laundering, and terrorist financing. KYC involves collecting and verifying personal information, such as name, date of birth, address, and government-issued identification numbers

KYC is a critical process for determining customer risk profiles and helps to identify whether a customer meets the legal and regulatory requirements of the business.


In Simpler Terms

Think of KYC as creating a new social media account where you’re asked to verify your identity, maybe through a phone number or email. Just as social platforms do this to ensure a safer online environment, financial institutions use KYC to create a safer financial ecosystem, ensuring that the money flowing through their systems is clean and the transactions are legitimate.

While KYC might seem like a modern concept, the practice of verifying a person’s identity for business purposes has been around for centuries. Ancient merchants and moneylenders would also perform their version of KYC, using personal knowledge and community reputation as their tools.