KYC (Know Your Customer) is a verification process in which a company confirms who its customers are, usually by checking identity documents and details, to prevent fraud and meet regulatory obligations.
Why it matters
Banks, payment providers, crypto exchanges and marketplaces use KYC to confirm that users are real people and to reduce misuse such as money laundering. It adds friction at sign-up, so providers balance verification depth with user experience. Requirements vary by country and sector. Related checks include verifying address, screening against sanctions lists and ongoing monitoring of activity. Obligations depend on the country, the industry and the provider's own risk policy.
Example
A payment app asks a new user for a government ID photo, a selfie and an address. The user can send small amounts straight away, but limits are raised only after verification is completed.
Common mistakes
- Collecting identity documents without secure storage.
- Applying the same level of checks to every user regardless of risk.
- Assuming the rules are the same in every country.
Related
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