Know your customer

Also called KYC, customer due diligence(CDD), know your client or know your partner(KYP)

Know your customer is the designation for policies and processes intended to verify the identity of customers and assess associated natural persons and/or legal entities. The assessment consists of an assessment of the customer 's suitability and the risk of any malicious intent or illegal practices.

The KYC policies a company or organization implements may stem from voluntary considerations or because of regulations that apply in certain industries. The latter occurs, for example, in financial institutions, real estate, cryptocurrency trading and other industries that are particularly susceptible to money laundering, fraud, bribery, terrorist financing and other criminal practices.

Purpose of know your customer

The goal is to contain and control risk. Protocols and analyses can focus on the onboarding and registration of new customers as well as the monitoring of existing customers. Many companies have a dedicated compliance department for this purpose.

With know your customer, you establish with certainty who you are doing business with and malicious parties can be kept out as much as possible. In addition, it helps to better understand customers and their financial transactions.

In addition to legislators, banks and other financial service providers may require their customers to establish certain protocols to screen the identity, backgrounds and motivations of their relationships. Whether such policies are properly implemented and carried out is often verified by an auditor.

In addition to the term know your customer, such processes are also referred to as customer due dilligence. The translation of the term due dilligence is due diligence.