Know Your Customer, or KYC, is the set of controls used to identify customers, verify relevant information and assess whether a relationship may be accepted and monitored. KYC is not completed merely by collecting an identity document. The process must connect the person or entity to the proposed service, ownership and expected activity.
What does KYC normally cover?
- Customer identity and contact information
- Legal existence and registration for an organization
- Authorized representatives and beneficial owners
- Purpose and expected nature of the relationship
- Risk screening and resolution of possible matches
- Review triggers when information or behavior changes
How does the process work?
- Collect the information required for the customer type and service.
- Verify the information against reliable evidence or permitted sources.
- Understand ownership, authority, purpose and expected activity.
- Assess risk and obtain the required approval.
- Monitor the relationship and refresh the record when required.
KYC vs. KYB
KYC often refers to identifying an individual customer. Know Your Business (KYB) focuses on a legal entity, its registration, activities, ownership and control. A business review usually still requires KYC checks on relevant individuals such as beneficial owners and authorized representatives.
KYC vs. customer due diligence
KYC is commonly used as the overall identification and verification program. Customer Due Diligence emphasizes understanding the relationship and applying a risk-based assessment. Policies should define the boundary because industry usage overlaps.
What should the record show?
Keep the evidence reviewed, verification source and date, ownership analysis, screening results, risk rationale, approvals and review trigger. A completed status should point to the underlying evidence rather than replace it.
