What is KYC and Why is it Useful?

The business and finance world is filled with TLAs (three-letter acronyms). The lingo is filled with verbal shorthand ranging from AAS (Automated Accounting System) to ZBB (Zero Based Budgeting). And there’s one that keeps popping up all over the place, from payments pages to casino reviews at playcasino.co.za: KYC. Today, let’s see what it means and why it is useful.

What is KYC?

KYC stands for “Know Your Customer”, which is a surprisingly accurate name for the process it covers. It is a standard procedure to protect various institutions and companies against fraud, corruption, terrorist financing, and money laundering. KYC is used in many areas, from banking to online casinos and cryptocurrency. But let’s go into a bit more detail.

Banking

In banking, KYC covers a series of steps taken by the financial institution to obtain information about the identity of the customer. For an everyday customer, this is simpler than it sounds: they have to submit a government-issued ID and proof of address (it’s often the same document) to confirm that they are indeed who they claim to be. At some banks, clients can open bank accounts even without submitting their proof of identity, but in this case, the services they can use are seriously limited.

KYC in banking is not just the best practice but is usually mandatory as well.

Online casinos

In online casinos, the goal and process of KYC is similar to the process undertaken by banks. But in their case, it has an extra function: making sure that the player is of legal age. Online gambling – and gambling, in general – is a heavily regulated industry, and KYC checks are a mandatory part of their anti-money-laundering regulations.

On top of all that, KYC checks also serve as a means of weeding out potential bad actors – individuals who attempt to play with stolen debit cards or identities, serve as an age-gate to prevent underage gambling, and also help identify players with possible gambling problems.

Crypto

KYC is also widely used in the world of cryptocurrency – and their goal is the same as in the other areas. Crypto exchanges and other cryptocurrency-focused financial institutions use strict KYC checks. The steps usually involve not just proof of identity and address by the submission of IDs, licenses, bank statements, and other documents, but also biometrics like images of their faces and their fingerprint data.

Cryptocurrency has had its reputation ravaged by repeated scandals – KYC is one of the means that helps keep it secure and trustworthy.

Final words

KYC is one of the more common TLAs used in finance and any other industry where the verification of the customer’s identity is important. It makes platforms and services safer for the providers and more secure for the customers as well by preventing the misuse of their identity and payment information.