Short for Know Your Customer, these are checks that crypto exchanges and trading platforms must complete to verify the identity of their customers.
What Is Know Your Customer (KYC)?
Short for Know Your Customer, this process refers to a financial institution’s obligation to verify the identity of those who use its platform.
Also dubbed Know Your Client, KYC is a crucial part of measures designed to prevent money laundering and terrorism financing.
KYC is a standard practice in the investment industry to ensure that advisors know specific information about their clients — meaning it extends beyond crypto exchanges.
These things can include a client’s investment knowledge, risk tolerance, personal details and financial position. From a crypto perspective, this usually involves requesting photo ID such as a passport or driver’s license.
It is very common for credit companies, banks and insurance agencies to conduct KYC and to require customers to provide all necessary information.
This aims to ensure the customers are not part of corruption or bribery.
KYC policies have risen in importance particularly in the global finance world to prevent illegal transactions.
The policies give financial institutions a blanket of protection to ensure their business is being conducted legally.
KYC processes usually begin with collecting basic data and information about customers in a process known as electronic identity verification.
Details such as a user’s name, birthday, account number and social security details can all be valuable pieces of information when detecting any fraudulent activity or financial crime.
After receiving this information, organizations usually check a database of individuals convicted for corruption to see if any customers may overlap.
The information is often also compared against a list of sanctions or a list of politically exposed persons.
Once that is done, organizations can gauge the level of risk involved in their customers engaging in any corrupt or fraudulent activity.
Crypto exchanges have come under increasing pressure to roll out KYC, amid fears that criminals may be using digital currencies to evade detection.
Can IBuy Crypto Without KYC?
It is possible to buy cryptocurrency without KYC, but you need to find an exchange or cryptocurrency peer-to-peer service without those requirements. While most crypto exchanges and services need to follow the KYC and AML regulations of the country that they are headquartered or domiciled in, in the decentralized cryptocurrency space, it is possible to find services that don't fall under KYC regulations.
However, do know that using a service without KYC regulation means that the service might not be overseen by any regulatory authority. While this could be a neutral thing, it could be a bad thing if the service turns out to be a bad actor.
On the other hand, sometimes crypto services that are regulated and/or have done their due diligence allow their users to trade in smaller amounts of cryptocurrency before requiring them to go through KYC.
FAQs
Short for Know Your Customer, this process refers to a financial institution's obligation to verify the identity of those who use its platform. Also dubbed Know Your Client, KYC is a crucial part of measures designed to prevent money laundering and terrorism financing.
What is the KYC definition of a customer? ›
What is KYC? KYC means Know Your Customer and sometimes Know Your Client. KYC or KYC check is the mandatory process of identifying and verifying the client's identity when opening an account and periodically over time.
What is the KYC principle of Know Your Customer? ›
Know your customer checks and the KYC principle is mainly used by banks and other financial service providers when registering new customers and describes the process of verifying the identity of customers - either before or during the start of doing business with them.
How to fill out Know Your Customer KYC form? ›
Download, print, and fill out the KYC form. You can also receive an official copy of this application form from a mutual fund house, or KYC kiosk. Within the form, enter your updated information which should spell checked, and must avoid missing any box. You will also be asked for Aadhar and PAN details.
What are the KYC rules for know your client? ›
In the United States, Know Your Customer (KYC) guidelines and regulations in financial services require professionals to verify the identity, suitability, and risks involved with maintaining a business relationship with a customer.
What is KYC for dummies? ›
Key Takeaways. Know Your Client (KYC) is a standard used in the investment and financial services industry to verify customers and know their risk and financial profiles. Three components of KYC include the customer identification program (CIP), customer due diligence (CDD), and enhanced due diligence (EDD).
What are the 4 pillars of KYC? ›
The four pillars, or four KYC elements, that banks and financial institutions look at when setting up their KYC programs are the customer acceptance policies and procedures, customer identification program and customer due diligence, risk management, and ongoing monitoring.
Why is KYC important in simple words? ›
The objective of KYC guidelines is to prevent banks from being used, by criminal elements for money laundering activities. It also enables banks to understand its customers and their financial dealings to serve them better and manage its risks prudently.
What is an example of Know Your Customer? ›
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.
How do I verify my customer KYC? ›
What is the step-by-step process for KYC online verification?
- Visit the official website of KRA (KYC registration agency).
- Login to the website with your your registered mobile number and enter the OTP received on your mobile.
- Make a self-attested copy of your e-Aadhaar and upload it.
- Accept the terms and conditions.
Know Your Customer (KYC) compliance is a set of procedures and protocols implemented by businesses and financial institutions to verify and authenticate the identity of their clients. The objective is to prevent illicit activities such as money laundering, fraud, and financing illegal activity.
How do I pass my KYC identity verification? ›
How to pass identity verification?
- Select your country. ...
- Then you should agree to our processing of your personal data.
- Fill in the form with your details: first name, last name, gender, date of birth and residential address.
- Select an identity document. ...
- Video verification.
- Q1. Difference between AML and KYC Tell me detail about KYC in depth Pep and sanctions Transaction monitoring Alerts Red flags Documents required for client onboarding. Add Answer.
- Q2. Self introduction and KYC introduction. Add Answer.
- Q3. Technical question about KYC Screening, PEPS etc? Add Answer.
At the minimum, firms must pull four pieces of identifying information about a client, including name, date of birth, address, and identification number. Most firms take additional steps in their screening process.
What is the KYC process? ›
KYC, or "Know Your Customer", is a set of processes that allow banks and other financial institutions to confirm the identity of the organisations and individuals they do business with, and ensures those entities are acting legally.
Who all fall under the definition of customer? ›
A customer is generally defined as a person who buys a good, product, or service. More specifically, customers are people or businesses currently purchasing, have purchased, or may be interested in purchasing a product or service from another individual or company.
What is KYC for existing customers? ›
KYC is required to be done once in every two years for high risk customers, once in every eight years for medium risk customers and once in every ten years for low risk customers. This exercise would involve all formalities normally taken at the time of opening the account.
What are the three main categories of customer risk under the KYC policy? ›
All accounts in the bank are risk categorized under KYC as High, Medium, and Low Risk categories. Customer's identity, Social/financial status, Nature of business activity, Information about the client's business and their location, etc.
What is KYC information required from customers? ›
At the minimum, firms must pull four pieces of identifying information about a client, including name, date of birth, address, and identification number. Most firms take additional steps in their screening process.
