Know Your Customer (KYC)

Know Your Customer (KYC) is the process via which the broker is verifying the true identity of its clients in order to comply with multiple regulations.

KYC is used to assess the suitability of customers when it comes to anti-money laundering regulations, any type of financial fraud and determining whether they are potentially risky for the brokerage.

In particular, KYC guidelines in financial services mandate that individuals make a cohesive effort to verify the identity, suitability, and risks involved with maintaining a business relationship.

KYC processes are also utilized by companies for the purpose of ensuring their proposed customers, agents, consultants, or distributors are anti-bribery compliant.

In an age of identity theft and myriad hacking, KYC has become a major emphasis by regulators.

As such, banks, insurers, export creditors and other financial institutions are increasingly demanding that customers provide detailed due diligence information.

These regulations had initially been imposed only on the financial institutions, having now extended to the non-financial industry, fintech, virtual assets dealers, and many non-profit organizations.

Regulators Taking No Chances with Identities

Regulated brokers in the retail industry are very stringent when applying appropriate KYC verifications after financial watchdogs worldwide have become stricter in monitoring their compliance with the procedure in recent years.

Not only brokers use KYC, the procedure is also widely used by banks, and any financial companies that provide insurance or credit and require appropriate due diligence.

Most major jurisdictions in the financial space mandate KYC requirements as well as all regulated brokers.

The vast majority of these countries have adopted KYC standards as mandatory only during the past two decades.

This has helped curb illicit behavior and has become a fixture of the industry.