TL;DR: KYC (Know Your Customer) is the process of verifying the identity of customers before or during the time they begin doing business. It is required by law for banks, fintechs, crypto exchanges, and many other regulated industries.
What does KYC mean?
KYC stands for Know Your Customer (sometimes Know Your Client). It is a mandatory due diligence process that regulated businesses must perform to verify the identity of their clients and assess their risk profile.
The term originated in financial services but has expanded to any business that could be exploited for money laundering, terrorist financing, or fraud. In 2026, KYC requirements extend to crypto exchanges, marketplaces, HR platforms, adult content sites, and online gambling operators.
Why is KYC required?
KYC exists as part of the global framework to prevent:
Money Laundering
Criminals disguising illegal proceeds as legitimate income through financial systems.
Terrorist Financing
Channelling funds to terrorist organisations through unknowing intermediaries.
Identity Fraud
Stealing someone's identity to open accounts, take loans, or commit crimes.
The three pillars of KYC
Customer Identification Programme (CIP)
Collecting and verifying basic identity information: full name, date of birth, address, and a government-issued ID document. This is the minimum required for any KYC process.
Customer Due Diligence (CDD)
Understanding the nature of the customer relationship, the purpose of the account, and the expected pattern of transactions. Includes PEP screening and sanctions checks.
Enhanced Due Diligence (EDD)
Applied to higher-risk customers: politically exposed persons (PEPs), customers from high-risk jurisdictions, or those with complex business structures. Requires more documentation and ongoing monitoring.
Who needs to do KYC?
KYC obligations apply to any business classified as an "obliged entity" under AML law. In the EU (5AMLD/6AMLD) and UK, this includes:
| Industry | Regulation |
|---|---|
| Banks & credit institutions | EU AML Directive, FCA AML |
| Crypto asset service providers (CASPs/VASPs) | FATF Rec. 15, MiCA, 6AMLD |
| Payment institutions & e-money | PSD2, EU AML5 |
| Online gambling operators | Gambling licence conditions |
| Estate agents | EU AML5, UK MLR 2017 |
| Legal & accountancy professionals | EU AML5, UK SRA/ICAEW |
| Art dealers (high value) | EU AML5 |
How does modern KYC work?
Manual KYC — having a customer come into a branch with their passport — is largely replaced by digital KYC. A modern API-based KYC flow looks like this:
With TrustVerifyID, this entire flow takes under 3 minutes and can be embedded in your app with a few lines of JavaScript or a single API call.
KYC vs AML vs KYB
These terms are often used interchangeably but have distinct meanings:
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