What is the primary purpose of the Know Your Customer (KYC) process?

The primary purpose of the Know Your Customer (KYC) process is to identify and verify a client’s identity. This fundamental step is essential for financial institutions to ensure they understand who they are doing business with. By collecting and verifying personal information—such as name, address, date of birth, and identification documents—financial institutions can prevent identity theft, fraud, and other illegal activities. KYC procedures are a critical component of anti-money laundering (AML) initiatives and regulatory compliance, helping to safeguard the institution and uphold the integrity of the financial system.

Ensuring that clients are properly identified also enables firms to create a more personalized client experience and to assess risk appropriately. The integrity of customer identification helps maintain trust within the financial ecosystem and fosters responsible lending practices.