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What is Know Your Customer (KYC)?

KYC is a process that banks and other financial institutions use to collect and verify identity information for existing and potential customers. Its purpose is to prevent fraud, money laundering, and other illicit activity, as well as the misuse of financial accounts. In the US, banks must carry out KYC in line with requirements introduced under the 2001 USA Patriot Act. At the global level, the Financial Action Task Force (FATF) was created in 1989 to coordinate efforts against money laundering. FATF issues standards and guidance that underpin Anti-Money Laundering (AML) frameworks, which member countries implement through their own laws and regulations. KYC and AML are closely linked and together help discourage and detect criminal activity in the financial system. KYC measures typically start when someone becomes a customer. Institutions first confirm that a prospective customer is who they claim to be before opening an account, and because there is no single legal verification standard, the way this is done can vary from one institution to another. Some of the identifying documents required to complete KYC are:
  • Driver’s License
  • Government-issued Identification Card
  • Passport
After an account is opened, the KYC process continues. Banks are required to keep their records up to date, so they will periodically ask customers to confirm their details. Banks also assign a risk level to each customer and monitor their transactions to ensure their activity looks normal. KYC rules apply to more than just regular banks. The investment industry uses them to follow FINRA Rule 2090. However, their goal is a little different. Instead of just fighting money laundering, investment firms use these checks to understand better what their clients need. On QFEX, users can create an account before finishing the KYC process. However, until the user’s identity is fully verified, these accounts have strict limits on what they can do. The main goal of KYC is to reduce fraud and money laundering. While it adds extra steps and takes time for both banks and customers, the safety benefits are usually worth the effort. Having a standard set of rules for everyone makes the process faster and easier.

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Blocked Countries and Restrictions

Location plays a major role in KYC and in determining which customers a platform is allowed to serve. For details on the countries and regions where QFEX cannot onboard users, see the list of restricted locations.