KYC
Know Your Customer — verifying the identity of counterparties, users, and beneficial owners.
KYC obligations flow from Bank Secrecy Act rules and FinCEN guidance covering money services businesses. Requirements include identity verification, beneficial ownership disclosure, and ongoing monitoring.
Start with the applicable obligation
Know Your Customer is a set of identity and due-diligence practices, not a universal checklist for every business. Requirements depend on the institution, activity, jurisdiction, and governing rules. Identify why verification is needed before collecting documents or choosing how deeply to investigate a relationship.
Distinguish identity from risk assessment
Confirming who a customer is does not establish that every transaction is legitimate. Where appropriate, assess ownership, the relationship’s purpose, expected activity, and changes that need review. Keep the evidence and reasoning for decisions so staff can explain both an approval and an escalation.
Handle information proportionately
Identity documents and ownership information can be sensitive. Limit collection to justified needs, control access, and define retention according to applicable obligations. A tool-generated match or risk label should be reviewed in context; it is not a legal determination or a substitute for a properly designed compliance process.
Related terms
See how Scarlet Risk covers KYC.
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