What is KYC? "Know your Customer"

What is KYC? "Know Your Customer"

What is KYC? Know Your Customer KYC checks require financial service providers to record information and identify your customers.

This process is part of the anti-money laundering/fighting terrorist financing (AML/CFT) efforts to combat financial crime and ensure client legality.

KYC proactively combats criminal activity by collecting and verifying customer information. These checks increase confidence in the industry and help financial service providers manage risk.

KYC has become very common in virtual currency brokers. However, some critics say this process removes the anonymity and the decentralization aspects of virtual currencies.

What is KYC? (Know Your Customer)

KYC is a common regulatory requirement that financial service providers must comply with. These controls primarily combat the financing and laundering of money from illegal activities.

KYC is a key measure in anti-money laundering regulations, making it an important security tool, especially in the cryptocurrency industry. Financial institutions and service providers should increasingly implement robust KYC procedures for the security of their customers and their assets.

If you've already opened an account with a cryptoactive broker, you've probably completed the KYC verification. Know Your Customer requires financial service providers to collect information to verify the identity of their customers.

This can be done through official identification documents or bank statements, for example. Like the Anti-Money Laundering Regulations (AML), KYC's policies help combat money laundering, terrorist financing, fraud and illicit transfers of money.

Typically, KYC is a proactive rather than a reactive approach. Most financial service providers obtain a customer's details from the registration/integration process before they can make financial transactions.

In some cases, it is possible to register accounts without completing the KYC, but these are accounts with limited functions. Many brokers allow users to open an account but restrict trading operations until the Know Your Customer verification is completed.

For KYC Verification, You Must Submit The Following Documents:

  • Your national driver's license
  • your identity card
  • Your Passport

In addition to verifying a customer's identity, it is also important to confirm their location and address.

Your identity documents will provide basic information such as your name and date of birth, but more information is needed to confirm your tax residency, for example. You will likely need to complete more than one KYC step.

Financial service providers often need to re-verify their customers' identities at regular intervals.

Who Makes KYC Verification Compliance Regulations?

Who Makes KYC Verification Compliance Regulations?

KYC regulations vary by country, but international cooperation exists regarding the basic information needed.

In the USA, Bank Secrecy Act and the Patriot Act of 2001 established most of the processes related to the current anti-money laundering (AML) policy and KYC verification.

The European Union and Asia-Pacific countries have developed their own regulations, but there are many overlaps with the US. The Anti-Money Laundering Directive AMLD and PSD2 regulations provide the main framework for EU countries.

At the global level, the FATF (International Financial Action Group) coordinates multinational cooperation under regulatory conditions.

Why do we need KYC in the Cryptoactives sector?

Due to the pseudonymous nature of virtual currencies, it is often used for money laundering and tax evasion. Cryptocurrency regulation improves their reputation and ensures that taxes are paid in accordance with the law.

There are three main reasons why KYC checks are needed in the crypto coin industry:

  • Block chain transactions (blockchain) are irreversible. There is no administrator to help if you make a mistake, which means valuables can be stolen or moved with no possibility of recovery.


  • Virtual currency has a high degree of anonymity (pseudonyms). You don't need to provide any personal details to open a crypto currency wallet.


  • In many countries, regulation is still uncertain when it comes to taxes and the legality of virtual currencies.

KYC requires more time to open an account, but it certainly offers benefits. Intermediate users will not necessarily be able to realize these benefits, but KYC has a significant impact on keeping your funds safe and fighting crime.

What are the KYC Benefits?

The benefits of KYC are not all obvious. However, it does much more than just fight fraud and is able to improve the financial system as a whole:

  • Funders can more easily assess their risks by establishing identity and history. financial of a customer. This process makes lending and risk management more accountable.
  • Fights identity tampering and other categories of financial fraud.
  • It reduces the risk of money laundering as a proactive measure.
  • It improves the trust, security and accountability of financial service providers. This reputation has a beneficial effect on the financial sector as a whole and can encourage more investment.

KYC (Know Your Customer) and Decentralization

From the beginning, crypto currencies have focused on decentralization and the elimination of intermediaries. As mentioned, anyone can create a wallet and store crypto coins without having to provide personal details. However, precisely for these reasons, the virtual currency sector has become more popular for money laundering.

Typically, governments and regulators require brokerages to complete KYC checks on their clients. Although it is very difficult to implement mandatory KYC for virtual currency wallets, it is an appropriate process for fiat currency to virtual currency exchange services.

Some investors are more interested in speculation about virtual currencies. Others more actively appreciate its core values ​​and usefulness.

Arguments Against KYC (Know Your Customer)

KYC has obvious benefits, but it still presents controversial points for some critics. Arguments against the KYC lawsuit are more common in the virtual currency industry due to its history. Typically, most criticism is related to privacy and cost issues:

  • There is an additional cost associated with performing KYC checks, which is often passed on to the customer through fees.


  • Some individuals do not have the necessary documentation for KYC verification, or may not have a fixed address. This makes access to certain financial services difficult.


  • Irresponsible or less capable financial service providers may not provide adequate security and your data, and personal information may be stolen by hackers.


  • Some argue that this process goes against the proposed decentralization of crypto coins.

What is KYC? in short

KYC's verification processes are an industry standard in financial services and virtual currency brokerage. It is one of the most important methods in the fight against money laundering and other financial crimes.

At first, KYC verifications may seem like a cumbersome and bureaucratic process, but they offer a lot of security for the user. As part of the anti-money laundering measures, KYC allows you to trade virtual currencies at brokers with greater security and confidence.



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