Know Your Customer (KYC) is a security procedure that requires businesses to verify the identity of their customers before providing services. This process helps prevent fraud and money laundering, as well as establish trust between the customer and business.
The Know Your Customer procedure includes collecting information from customers such as name, address, phone number, date of birth, bank account numbers and other financial data. This information is used to confirm whether the customer is who they say they are and ensure that any transactions or investments made by them are legitimate.
In the cryptocurrency world, KYC compliance can be achieved in various ways depending on how regulated an exchange platform or token issuer is. The most common methods include facial recognition technology for user identification; document verification via passport scans; proof-of-address documents such as utility bills; personal identification numbers (PINs); biometrics like fingerprints and voice prints; video conferencing with a representative; signed contracts or statement forms sent through mail/courier service etc.. Exchanges may also require users to link their accounts to third party services like Google Authenticator for added security measures.
For exchanges based in certain countries such as Japan or South Korea where stringent regulations exist around crypto trading activities – KYC implementation becomes mandatory in order to comply with local laws & regulations governing these operations. Similarly some governments have introduced ‘travel rule’ which makes it compulsory for all exchanges operating within its jurisdiction need to collect traveller details when transferring funds internationally i.e., source & destination wallet addresses along with amount being transferred must all be verified by exchange operators before initiating any transfer across borders.
Adopting strict KYC processes not only ensures safety of traders using these platforms but also adds legitimacy & transparency into overall system thereby protecting end users from potential scams & malicious actors who might try take advantage of lack of oversight present in unregulated markets/platforms.
