What is KYC?

KYC, or Know Your Customer, refers to both a regulatory compliance regime and the process organizations use to verify the identity of their clients before doing business with them. As a legal compliance regime, KYC is a strategic risk management tool used by financial institutions to monitor, evaluate, and assess customer risk. KYC is a legal compliance requirement, as indicated under anti-money laundering (AML) legislation.

A robust KYC regime can significantly reduce risk to an organization and protect legitimate customers by verifying customer identities. As part of the due diligence process, KYC helps financial institutions protect themselves from unknowingly doing business with sanctioned individuals, organized crime, and scammers.

Why is KYC important?

In an age of data breaches and identity theft, KYC shines a light on clients as KYC policies require financial institutions to verify and retain essential personal information and other facts about every customer. While financial institutions are legally required to enforce KYC compliance regimes, best practices are increasingly spreading to other sectors as businesses search out tools to protect themselves and their customers. With identity theft on the rise, KYC is an essential tool for protecting consumers and reducing risk for your organization.

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For financial institutions and other businesses, KYC is essential for establishing risk profiles for customers and clients. Customer risk profiles are important tools for identifying high-risk customers who may be prone to money laundering and financing terrorism. 

As such, KYC is more than just an internal risk management strategy, but part of an organization’s larger duty of care for combating crime. Use KYC to protect your organization from legal or reputational risks, combat and prevent money laundering, protect legitimate customer assets, and help establish client credibility.

How Precisely helps you know your customer

Overcome data challenges to streamline compliance at every step with Spectrum Entity Resolution

The cost of KYC compliance impacts every financial institution. Poor data quality and the inability to see the full breadth of customer relationships make it even more challenging. Spectrum Entity Resolution makes it easy to find, link and visualize complex relationships. 

For more information, read our white paper on Global AML and KYC Compliance