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  • Writer's pictureGlobal MoonXBT

KYC

KYC refers to a process that banks and other financial institutions use to gather identifying data and contact information from current and potential customers. Its purpose is to prevent fraud, money laundering, and other illicit activity, as well as the misuse of financial accounts.

In the US, Banks are legally mandated to use KYC in compliance with the 2001 USA Patriot Act. In 1989, the Financial Action Task Force (FATF) was established to fight money laundering on an international scale. FAFT sets standards and provides recommendations to accomplish this goal through Anti-Money Laundering (AML) practices. Member countries and jurisdictions enforce various laws, rules, and regulations to work with the AML guidelines. KYC and AML go hand-in-hand in helping to prevent dishonest and criminal financial activity.


KYC practices usually start before an individual becomes a customer. Financial institutions must first verify the stated identity of a potential customer before opening an account. Because there are no legal verification standards, this process may look different for each bank.


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