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Know-your-customer (KYC)

Konw-your-customer (KYC) is the process a financial institution must follow before allowing a customer to use its services.

It involves the scrutiny of a customer's background information. Examples include but are not limited to identity checks, customer screening, and so forth. The purpose of this safety measure is to combat money laundering.

Moreover, KYC (and CDD) are integral components of the AML procedure. KYC serves as the primary stage for confirming customers' identities. At the same time, CDD utilises the validated information from KYC to monitor existing customers and assess any associated risks of money laundering or terrorist financing.

KYC and the Travel Rule

Per the Travel Rule (Recommendation 16), the FATF asserts that for wire transfers involving virtual assets and virtual asset service providers (VASPs), "Countries should ensure that originating VASPs obtain and maintain accurate originator information and required beneficiary information on virtual asset transfers."

As per the FATF's glossary, "accurate" signifies that the data has been validated for precision [page 57], implying that VASPs must employ a KYC process for this purpose.

KYC, CDD and EDD Overlap Explained

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