KYC or Know Your Customer

KYC or Know Your Customer

KYC is the practice carried out by companies to verify the identity of their clients in compliance with legal requirements and current laws and regulations either before or during the time that they start doing business with them.

KYC standards are designed to protect financial institutions against fraud, corruption,  Anti-Money Laundering (AML) laws and terrorist financing.

Apart from being a legal and regulatory requirement, KYC is a good business practice as well to better understand investment objectives and suitability, and reduce risk from suspicious activities.

In addition to the KYC process for new customers, it’s also a requirement to conduct KYC on repeat customers or “renew” the KYC profile on file at the firm. Maintaining accurate and updated records firm-wide is critical. 

A KYC process usually consists of verifying the customer’s identity, investment suitability, and due diligence on various documentation such as proof of address and income.