Know Your Customer, or KYC, refers to the checks that banks, exchanges, and other financial services use to confirm who their customers are. By linking accounts and transactions to real people, KYC makes it more difficult for fraud or money laundering to happen without being noticed.
KYC is how organizations check a person’s identity and decide how risky they might be as a customer. It helps businesses follow anti-money laundering laws and keep their platforms safe. These checks can also show if someone is politically exposed, on a sanctions list, or linked to negative news.
Companies gather identity details and check them against official records or databases. They usually ask for a government ID, proof of address like a bill, and sometimes a live photo or video. After the first check, some providers keep monitoring for unusual activity.
When a business does KYC, it might ask for your name, date of birth, national ID or passport number, proof of address, and sometimes a tax or social security number, depending on local laws. Some services use electronic checks to make the process faster. These details help firms link a real person to an account.
Since many crypto systems allow anonymous transactions, exchanges and wallet services use KYC to follow legal rules. Some crypto platforms let users access limited features before finishing KYC, while others require full verification from the start. KYC helps crypto companies spot suspicious activity, build trust, and follow the law.
KYC helps businesses lower legal risks and protect their reputation. For users, it makes the service safer and helps prevent criminals from using the platform. KYC also supports market stability by making it easier to track bad actors.
Collecting personal data raises privacy concerns and can attract hackers. Verification may also slow down onboarding and increase costs. Some people say strict KYC goes against the privacy and decentralization values of cryptocurrencies.
Different countries set different KYC rules, and firms must follow the laws where they operate. Financial institutions generally have firm obligations to perform due diligence, report suspicious activity, and keep records for audits. Companies often add screening for sanctions and adverse media as part of compliance.
KYC can be light-touch for low-risk users or more in-depth for higher-risk profiles. Some services allow limited actions without full verification, while others expect ongoing checks once an account is open. Electronic verification tools aim to make the process faster and less intrusive.
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