Know Your Customer or KYC is the requirement to know the identity of the customer. This is important in most financial aspects of business and actually plays a key role in fraud prevention, identity theft, money laundering, and accurate tax filing. Businesses are required to do that as a fraud prevention measure. Fraud is getting out of control and every industry is becoming its target some way or another. The digital means of operation has given rise to sophisticated cyberattacks and many companies have faced millions of dollars through that. Know Your Customer is there to curb fraud by identifying the business dealings. There are now AI-powered solutions that can digitally perform Know Your Customer and ensure safer business practice. In this blog, we will highlight the industries that can benefit from Know Your customer.
KYC is increasingly becoming a prerequisite for all kinds of businesses—not just banks. The main goal of KYC verification is to confirm that your clients are who they claim to be and to grant them access to the services or goods they require. Numerous options exist for doing this. When someone applies for a new credit card or savings account, a KYC check may be as simple as requesting more identity documents or proof of address.
KYC standards are becoming increasingly important for practically all online transactions, while they are particularly important for financial and banking services as well as allied industries like insurance, real estate, and trading. KYC is now necessary to assist minimise these attacks in more recent industries that have witnessed a considerable increase in fraud.
The History of Know Your Customer
KYC or Know Your customer was initially introduced in the 1970s through the Bank Secrecy Act. The requirement for this became rigid after the 9/11 attack. The law requires the business entities to verify the identity of all their clients to capture the fraudsters.
They are also to monitor their transactions and ensure that illicit activity is occurring. If they see any unusual activity they must report to the concerned authority of the regulatory body. This act was passed to also monitor the financial flow so that any criminal indulging in money laundering activity is instantly caught. Initially, this was mandatory for the banks and financial services but now other sectors are being regulated as well.
The business that fails to identify and record their customer’s identity and do not report to the authorities of any unusual activity are heavily fined and even sometimes face permanent closure of their business.
The Digital KYC Solution
The digital solution of KYC can perform identity verification within seconds. It offers face verification, document verification and video KYC services. Face verification is a solution that verified the identity by verifying the face of the person against the picture of their ID document. The document verification ensures the legitimacy of the identity document. The AI of the digital solution is trained on the different type of ID documents to detect any tampered or fake ID documents and ensure their authenticity. The video KYC solution allows businesses to perform KYC remotely through a video interview call with a KYC expert. The process uses both AI and HI to make sure the identity of the individual is legit.
KYC for Industries
Business entities can benefit from the KYC solution if they opt for a good KYC provider.
● Banking and Financial Institutions
Banks have always been targetted with fraud or money laundering. This is why it is necessary for the banks to verify the customers and ensure that all the monetary dealings are being conducted securely. If the banks are not regulated, they can face huge penalties. Fraudsters can steal the identity of someone and get access to someone else to account to steal their money. They can even open up various accounts for their illicit financial funds. This is why banks need a secure and robust solution that performs KYC in seconds and streamline business operations.
● Medical Industry
The medical ID is always a major target for identity theft as the medical identity costs a lot in the black market. Medical treatments can be costly and this is why people steal other people’s identity to get treatment for free. This can be risky for the victim of the ID theft as it can alter their medical history. The fraudsters can also steal prescription drugs through it as well.
● Digital Currency
Digital currency is the booming industry ever since bitcoin hit record-breaking prices. fraudsters are now trying to take benefit of it and the anonymity factor does not help. The regulators are becoming increasingly concerned over the misuse of the currency. Money launderers also use the anonymity factor to hide their illegal money. KYC will ensure transparency in the industry and secure the industry from criminals as well as fraudsters.
● E-commerce
E-commerce or online business platforms must apply KYC measures to identify all their customers. It is harder to verify the identity of the customers online and fraudsters can take advantage of that. This is why they must ensure a proper identity verification system.
Types of KYC Checks
| Check | What it is |
|---|---|
| Customer Identification Programme (CIP) | Collecting and checking a customer’s name, date of birth, address, and ID |
| Customer Due Diligence (CDD) | Checking the customer’s background and the risk they pose |
| Enhanced Due Diligence (EDD) | Deeper checks for high-risk customers, such as politicians |
| Ongoing monitoring | Watching transactions over time for unusual activity |
Every bank in the United States must run a Customer Identification Programme under the USA PATRIOT Act. Customer Due Diligence is the standard check for most customers. Enhanced Due Diligence applies to high-risk customers and needs more documents and more checks. Ongoing monitoring never stops: banks must watch for unusual transactions and report them.
Anti-Money Laundering Laws Behind KYC
KYC rules come from anti-money laundering laws. In the United States, the Bank Secrecy Act of 1970 first required banks to verify customers and report suspicious activity. After the 9/11 attacks, the USA PATRIOT Act made the rules stricter. The Financial Crimes Enforcement Network (FinCEN) enforces these rules. In the European Union, the Anti-Money Laundering Directives set similar rules. Businesses that fail to follow KYC rules can face heavy fines and even closure.
How Businesses Implement KYC
Most businesses now use digital KYC tools. A customer uploads a photo of their ID and takes a selfie. The software checks the ID against the face and against watchlists. The whole check can take seconds. For high-risk customers, a human expert reviews the case. Businesses should store KYC data safely and follow privacy laws. Choose a KYC provider that meets the rules in your country and industry.
Frequently Asked Questions
What is Know Your Customer (KYC)?
Know Your Customer or KYC is the requirement to know the identity of the customer. It plays a key role in fraud prevention, identity theft, money laundering, and accurate tax filing.
Which industries require KYC?
Banking and financial institutions, the medical industry, digital currency, and e-commerce all need KYC. KYC standards are becoming important for practically all online transactions.
What are the types of KYC checks?
The main checks are Customer Identification Programme, Customer Due Diligence, Enhanced Due Diligence, and ongoing monitoring.
What laws require KYC?
In the United States, the Bank Secrecy Act of 1970 and the USA PATRIOT Act require KYC. The Financial Crimes Enforcement Network enforces these rules.
How does digital KYC work?
A customer uploads a photo of their ID and takes a selfie. Software checks the ID against the face and against watchlists, often within seconds.
Disclaimer: This guide gives general information only and is not legal advice. KYC rules differ by country and industry. Check your local regulator for current rules.
Last Updated: 6 November 2026