The Importance of KYC


There’s no escape from KYC in the world of financial and banking operations. In case you didn’t know, KYC means Know Your Customer. It is a mandatory process for identifying and verifying customers the world over.

Originally, KYC laws were introduced in 2001 as part of the Patriot Act, which was passed after 9/11, to provide a wide range of legal means to deter or highlight potential terrorist behavior. Today, every legal and transparent financial product requires KYC verification.


Why Introduce KYC?

The aim of KYC is not to annoy the customer with bureaucracy and paperwork, but to prevent identity theft, money laundering, terrorist financing, and financial fraud. A KYC check allows a company to better know their customer and manage risks accordingly.

KYC and AML: What’s the Difference?

The AML concept is much broader than KYC. AML stands for Anti-Money Laundering and refers to a set of policies, laws, and regulations to combat generating income in a fraudulent way.

However, KYC and AML are connected. For example, if a digital exchange has established KYC procedures, it shows that the startup is legitimate. If a project is following AML and KYC regulations, it has a greater potential to start successful collaboration with the banking sector. Why would they want to do that? Many digital exchanges are struggling to get a bank account to simplify global financial operations. Banks, in turn, are struggling to trust digital exchanges in terms of AML. This is where KYC and transparency come into play and are so important.

Why Does KYC Matter?

KYC is a manual process that includes physical verification of document scans. It is important because it makes sure that the customer and the information provided by them are real.



KYC and Digital Exchanges

At a first glance, the idea of applying KYC registration contradicts one of the main principles of the Crypto-world – anonymity. But if we dig deeper, anonymity becomes a dangerous weapon in the wrong hands.

In essence, the KYC process for digital exchanges and banks is the same. It always requires proof of identity (POI), proof of address (POA), and other relevant information for verification. However, the actual steps included in the process may differ.

Cryptocurrency exchanges can request or accept different types of IDs, ask to sign different forms, and include different procedures overall.

What Happens if I Refuse to Provide the Documents?

This one is easy. If you refuse to provide any of the requested documents, you won’t be able to buy, sell, or trade crypto with that exchange. You must comply if you wish to enter the Crypto-scene legitimately.

OK… Which Documents Do I Need?

The most important documents for submission are proof of identity and proof of address.

The following documents are generally accepted as proof of identity:

· Passport;

· Driving license;

· Voter’s Identity Card

When it comes to proof of address, the documents that can be submitted are as follows:

· Passport;

· Utility bill, e.g., telephone bill, electricity bill, gas bill;

· Bank account statement with signature verification;

· Letter from employer, bank manager of scheduled commercial banks