What is KYC (know your customer)?
KYC, short for know your customer, is the process a bank uses to verify who a customer really is and assess the risk they pose, before opening an account and on an ongoing basis. It is a legal requirement aimed at stopping money laundering.
How a bank verifies who a customer really is and assesses the risk they pose.
Aimed at stopping money laundering.
Banks verify identity at sign up and keep monitoring the relationship over time.
Meeting strict rules without turning sign up into an obstacle course.
In practice it means checking identity documents, confirming a real person is behind the application, and screening against risk lists. Done badly it is slow and frustrating. Done well it is nearly invisible.
- Checking identity documents
- Confirming a real person is behind the application
- Screening against risk lists
The modern challenge is balancing the two: meeting strict rules without turning sign up into an obstacle course that drives customers away.
Done badly
Slow and frustrating- Sign up becomes an obstacle course
- Customers are driven away
Done well
Nearly invisible- Strict rules are met
- Sign up is not an obstacle course
Figure 1. KYC at sign up and over time
KYC as this article describes it: checks at sign up (identity documents, a real person, risk lists), then monitoring over the life of the relationship, which is sometimes called ongoing due diligence. Structure only.
Sthenos builds compliant financial software, including a digital relationship manager app for a banking institution.
Is KYC a one time check?
No. Banks verify identity at sign up and keep monitoring the relationship over time, which is sometimes called ongoing due diligence.
Related reading
Related terms:
Industries: Fintech Software Development Services, Financial Services.
