Know Your Customer (KYC) is a regulatory requirement that obliges banks and financial institutions to verify the identity of their clients before establishing a business relationship. It forms a fundamental part of the broader Anti-Money Laundering (AML) framework and is designed to prevent financial institutions from being used for money laundering, terrorist financing, fraud, and other financial crimes.

In practice, KYC begins at the onboarding stage. A bank must confirm that a customer is who they claim to be by collecting and verifying identification details such as name, address, date of birth, and official identification documents. For corporate clients, this extends to verifying company registration documents and identifying the ultimate beneficial owners behind the business this is known as, Know Your Business (KYB).

However, KYC does not end once an account is opened. Banks are required to understand the nature and purpose of the customer relationship, assess the level of risk associated with the client, their jurisdiction, business type, and monitor transactions over time. If a customer’s activity is inconsistent with their stated/expected profile, further investigation may be required.

Failure to conduct adequate KYC can expose banks to significant regulatory fines, reputational damage, and even loss of licence. For this reason, KYC & KYB is not simply an administrative process; it is a critical safeguard within the global financial system.