KYC (know your customer)
Also called know your customer, CIP, customer due diligence.
The checks a regulated business runs to confirm a customer is who they say they are and to judge the risk they pose.
Last updated
What it is.
KYC starts with collecting and verifying identity. For US banks, the customer identification program rule in 31 CFR 1020.220 sets the minimum: name, date of birth for individuals, address and an identification number, verified through risk-based procedures so the bank can form a reasonable belief that it knows the customer's true identity.
Beyond identity, KYC includes understanding the purpose of the account, rating the customer's risk, and keeping the information up to date. Businesses as customers go through KYB. KYC is part of a wider AML program.
Why it matters
KYC is the first thing a new user meets in most fintech apps, so it shapes sign-up conversion as much as compliance. Every check also has a cost per customer, and failed or manual reviews slow onboarding. Designing the flow well is a product problem, not only a legal one.
In a product build
In a product build KYC is a flow of screens, calls to a verification vendor, a review queue and stored evidence. The /build guide on KYC onboarding covers how those pieces fit.
Common mistakes.
- 01
Asking for every document up front, when lower-risk users could start with less.
- 02
No path for users the automated check cannot decide, so they just drop off.
- 03
Storing ID images without strict access control and retention rules.
Read the official text.
Primary sources this definition is based on.
- 31 CFR 1020.220, Customer identification programs for banks (eCFR)checked 2026-10-25
- 31 CFR 1010.230, Beneficial ownership requirements (eCFR)checked 2026-10-25
Work it out with a tool.
Related terms.
- KYB (know your business)Checking a business customer: that it legally exists, who owns and controls it, and how risky it is.
- AML (anti-money laundering)The laws, checks and controls that stop criminals from moving or hiding illegal money through financial services.
- PEP (politically exposed person)Someone who holds or held a prominent public role, or a family member or close associate of one, treated as higher risk for corruption.
- Sanctions screeningChecking customers, counterparties and payments against government sanctions lists before letting money move.
