Know Your Customer (KYC)

Know Your Customer, or KYC, are details that cryptocurrency exchanges and most centralized crypto platforms request to verify the identity of their clients.

What Is Know Your Customer (KYC)?

KYC, also called know your customer/client, is an act in cryptocurrency exchanges or financial institutions used as a verification process to understand or verify the identity of their customers. It is a vital part of the platform regulations created to prevent fraudulent activities such as money laundering and finance terrorism.

KYC isn’t only limited to just cryptocurrency exchanges alone. It is standard practice for investment industries like banks, insurance agencies, and others to ensure that they have and know some specific vital details about their customers.

These details could be the customer’s knowledge about their expertise, financial position, risk tolerance, and personal information such as; government-issued ID, driver’s license, international passport, and more. This could also be similar to the crypto type of KYC details.

KYC is a requirement a customer will need to fulfill to sign up for platforms like investment industries or cryptocurrency exchanges, and it could also be compulsory to provide this information if you’d like to use their services. It is common in credit companies, insurance agencies and banks. And this aim is nothing harmful. It is to ensure their customers do not participate in fraudulent activities or financial crimes.

Investment industries aside, KYC has been a policy that must be followed in the global finance sectors to prevent illegal transactions made from unlawful activity. This policy has given financial institutions insurance that their business is being executed lawfully.

The processes of KYC usually start with requesting the customer’s basic details, such as birthday, account number, full name, and other social security details, in electronic identity verification. These details could be of help when trying to trace the genesis of a financial crime.

After collecting these information details, institutions check a database of all personal details censured for corruption to see if any of their customer’s details may be similar. These details could also be compared to a list of authorizations or politically recognized individuals. After all of these are done, the institutions can know the risk level involved in allowing a customer to use their platform.

Cryptocurrency exchanges have also joined in making KYC a requirement for customers to be cautious of criminals using digital currencies.

What Are The Requirements for KYC?

The “Know Your Customer” privacy policy includes three compulsory steps which are given below.

1. Customer Identification Program (CIP)

Every firm must have three basic pieces of information about its clients.

  • Complete name
  • Date of birth (age)
  • Address
  • Contact number
  • Email address (optional)

This information should be used to figure out if the person is wanted in any criminal offense or a defaulter of any financial institution. Furthermore, firms can use this information to scan the person in various databases. Crypto Know Your Customer rules are also the same.

2. Customer Due Diligence (CDD)

Customer Due Diligence is a process through which a firm ensures that the information collected during the identification program remains safe. Firms evaluate the nature of existing relationships to make sure all activity matches with historical information about the customer. The objective is to verify the applicant’s identity and asses the riskiness.

3. Enhanced Due Diligence (EDD)

This is a requirement not commonly followed by many firms. If some person is flagged by the software, firms start EDD and may ask for further information such as the source of income, management reports, and more. The firms ask to upload pictures of ID cards and bank statements as well. Some brokers, exchanges, and financial institutions have made these steps compulsory in their registration forms. Know Your Customer cryptocurrency platform requirements are also the same.

Can I Buy Cryptocurrency Without KYC?

Short answer is yes.

Depending on the cryptocurrency exchange you want to make use of. Not all cryptocurrency exchanges make use of the KYC policy. However, some crypto exchanges that are regulated and require a KYC verification to use their platform might allow new users to trade in smaller amounts of cryptocurrency before actually requiring them to go through the KYC verification process.

Conclusion

A platform that doesn’t require KYC means that the services made there may not be administered by a regulatory council. However, this could be something impartial. But it could also be harmful if the service turns out fraudulent.

Josh Fernandez

Josh Fernandez

20-something Non-giver of ETH.

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