KYC (from English "Know Your Customer") is an important aspect in the banking and financial sectors aimed at ensuring security and preventing financial crimes such as money laundering and terrorism financing. However, before considering what exactly KYC is, it is necessary to understand where this name comes from and how the concept itself originated.
Origin of the name KYC
The term "Know Your Customer" comes from English and literally means "know your customer." This term was first used in the banking sector in the 1990s when banks began to more actively recognize the need to study and identify their customers.
History of KYC's emergence
The emergence of the KYC concept is related to the growth of global financial operations and the increasing threats of financial crimes. For example, money laundering became a serious problem, and banks were forced to pay more attention to verifying and identifying their customers.
The goal of KYC
The main goal of KYC is to ensure security in transactions and prevent financial crimes by identifying and verifying customers. This allows banks and financial institutions to avoid involvement in illegal or undesirable operations that could harm their reputation and cause financial losses.
KYC process
The KYC process involves collecting and verifying personal information about customers, such as name, address, date of birth, document numbers and series, etc. Additionally, further checks may be conducted, such as checking against sanctions lists or connections with potentially undesirable individuals.
Example of KYC verification
The KYC process at a bank or cryptocurrency exchange typically includes several stages aimed at ensuring security and identifying customers before granting access to financial services or trading cryptocurrencies. Here are the main steps usually included in the KYC process (but each organization has its own process):
Registration and provision of personal information:
The customer registers on the bank or cryptocurrency exchange platform and provides personal data such as full name, address, contact information, and other identification details.
Customer verification
The institution conducts customer verification, usually by checking documents such as a passport, ID card, or driver's license. This may include uploading scans or photos of documents for further verification. More modern technologies using smartphone cameras may also be employed.
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Address confirmation
Some institutions may require confirmation of the residential address, for example, by providing a copy of a utility bill, a property ownership document, or a rental agreement.
Sanctions list and high-risk individuals verification
Banks and cryptocurrency exchanges may conduct checks on customers to see if they are on sanctions lists or have connections with high-risk individuals or organizations.
Completion of the KYC process
After successful verification of the customer's identification and other data, the KYC process is considered complete, and the customer gains access to the bank's services or can start trading on the cryptocurrency exchange fully.
These steps may vary depending on the policies of each specific institution, as well as the requirements of regulatory bodies in each country. However, the main goal remains unchanged - to ensure security and prevent financial crimes by identifying and verifying customers.
Be cautious and complete KYC only with verified online services (such as exchanges). Do not upload your documents to suspicious websites.
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It is worth noting that a simplified version of KYC in Ukraine is currently provided by Diia and Diia.Signature. Services that have integrated verification through Diia have reduced the time for passing KYC verification and also increased trust in themselves. For example, the most well-known cryptocurrency exchange Binance was one of the first to integrate Diia into its KYC process.
