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Definition of KYC: Know Your Customer


Know your customer (KYC) refers to due diligence activities that financial institutions and other regulated companies must perform to ascertain relevant information from their clients for the purpose of doing business with them.

The objective of the KYC (Know Your Customer process) is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities.

The process of KYC entails identifying the customer and verifying the identity by using reliable and independent documents or information. The bank while opening different accounts collects documents to identify and verify the customer as required under the existing laws to demonstrate that it has performed the existing KYC procedures.

Where the bank is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer, the bank may consider closing the account or terminating the banking/business relationship after issuing due notice to the customer often without explaining the reasons for taking such a decision.

Know Your Customer processes are also employed by companies of all sizes for the purpose of ensuring their proposed agents', consultants' or distributors' anti-bribery compliance. Banks, insurers and export credit agencies are increasingly demanding that customers provide detailed anti-corruption due diligence information, to verify their probity and integrity.

Know your customer policies are becoming increasingly important globally to prevent identity theft, financial fraud, money laundering and terrorist financing

The KYC also refers to AML regulations and procedures.