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September 12, 2026Short & citedBlog
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Money & Work • Finance

Know Your Customer

Know Your Customer (KYC) is a customer identification and due diligence process used mainly in financial services to verify a customer’s identity and assess risk.

Updated September 12, 20261 min readCited sources

Know Your Customer (KYC) is a compliance process used to verify a customer's identity and assess risk. It's a key part of anti-money laundering and counter-terrorist financing efforts in financial services.

What it is

KYC refers to procedures that regulated businesses use to confirm a customer's identity before or during a business relationship. The process helps organizations understand the customer's identity, the nature of the relationship, and the risk involved.

Why it matters

KYC supports anti-money laundering and counter-terrorist financing controls by helping institutions identify suspicious activity and reduce exposure to fraud. It is a foundational element of AML compliance programs, helping prevent financial crime.

Key details

Common KYC programs include customer identification, customer due diligence, and ongoing monitoring. This may involve collecting identity documents, checking beneficial owners, and updating information over time. KYC is used by banks, crypto exchanges, and other regulated entities, with requirements varying by jurisdiction.

In short

  • KYC verifies customer identity and assesses risk profile.
  • It is part of AML and CTF compliance frameworks.
  • Typical components: customer identification, due diligence, ongoing monitoring.
  • Used to prevent money laundering, terrorist financing, and fraud.
Canadian angle

In Canada, KYC is relevant to banks and other reporting entities that must identify customers and monitor transactions under anti-money laundering and anti-terrorist financing rules.

Quick questions

What does KYC stand for?
KYC stands for 'Know Your Customer' and is also sometimes called 'Know Your Client'.
What is KYC used for?
It is used to verify customer identity, assess risk, and help prevent money laundering, terrorist financing, fraud, and other financial crimes.
Is KYC the same as AML?
No. KYC is one component within broader anti-money laundering (AML) compliance programs.

Sources

  1. Plaid — https://plaid.com/resources/banking/what-is-kyc/
    Supports: Definition of KYC as verifying customer identity and assessing risk; core components including customer identification, customer due diligence, and continuous monitoring; purpose in preventing money laundering, terrorist financing, and fraud.
  2. Wikipedia — https://en.wikipedia.org/wiki/Know_your_customer
    Supports: KYC laws and guidelines in financial services; relationship to AML and CTF; alternative term 'Know your client'; eKYC mention.
  3. Chainalysis — https://www.chainalysis.com/glossary/know-your-customer-kyc/
    Supports: KYC as identity verification procedures before establishing a business relationship; AML compliance role; core components CIP, CDD, and ongoing monitoring; use by regulated entities including crypto platforms.
  4. SWIFT — https://www.swift.com/risk-and-compliance/know-your-customer-kyc
    Supports: KYC standards protect against fraud, corruption, money laundering, and terrorist financing; steps to establish identity, understand activities, and assess money-laundering risk.