What is KYC?
KYC rules require financial institutions and many fintechs to confirm who their customers are before and during a business relationship. It is a core part of anti-money laundering (AML) regulation guided internationally by the Financial Action Task Force (FATF).
The main KYC steps
- Customer identification (CIP): collect and verify ID, such as a passport, national ID, address and, for businesses, registration documents.
- Customer due diligence (CDD): understand the customer's activity and assess risk.
- Enhanced due diligence (EDD): extra checks for higher-risk customers, such as politically exposed persons or high-risk countries.
- Ongoing monitoring: watch transactions for unusual activity and keep records up to date.
KYB: know your business
For business customers, checks extend to company registration, directors and ultimate beneficial owners (UBOs).
Why it matters for businesses
- Opening business bank accounts and payment gateways requires KYC.
- Incomplete KYC can delay payouts or freeze accounts.
- Businesses in regulated sectors must run their own KYC on customers.
Tips
Keep company documents, director IDs and proof of address current, and respond quickly to verification requests to avoid service interruptions.