Skip to content

KYC: Know Your Customer

  • by
What Is KYC?

Table of Contents

What Is KYC?

KYC, short for Know Your Customer or sometimes Know Your Client, is a legally required process that banks, bitcoin exchanges, and other financial institutions use to verify the identity of their customers. KYC is required by law in many countries in order to comply with anti-money laundering (AML) regulations.

KYC varies by jurisdiction but it involves collecting identifying information about customers, such as name, address, date of birth, national ID number verification, facial verification, document verification such as utility bills as proof of address, and even biometric verification. It can also include other information like income levels, employment history, and investment portfolios. It is used by financial institutions to screen customers for financial crime risk and to comply with financial surveillance requirements.

KYC has been criticized for being anti-privacy and for excluding some people from the financial system but it legally required by all regulated financial institutions such as bitcoin exchanges and even bitcoin ATMs.

If you value your privacy and anonymity, it is important to consider these factors before using a Bitcoin exchange. There are a few ways to buy Bitcoin without going through a KYC exchange, but they tend to require a better understanding of how bitcoin works and often come with a premium but is well worth it if you value your privacy.

Risks Of KYC

One of the biggest privacy concerns around KYC is the potential for personal data to be mishandled or stolen. In 2018, for example, the personal data of nearly 150 million people was exposed in a massive data breach at Equifax. This type of incident highlights the importance of ensuring that any personal data collected during the KYC process is properly secured.

Another risk associated with KYC is the possibility that hackers could target financial institutions in order to obtain access to customer data. In 2017, for example, hackers were able to steal more than $81 million from Bangladesh’s central bank by targeting the SWIFT payment system. By gaining access to customer data through a financial institution, hackers would be able to commit a wide variety of crimes, ranging from identity theft to fraud.