Know Your Customer (KYC) is an important effort in preventing criminals from accessing the international banking system. Its anti-money laundering (AML) requirements – banks verifying customers’ identity, confirming they’re not criminals, and assessing their risk factors – are remarkably straight-forward.
Unfortunately, the law creating it doesn’t provide an explicit standard for what types of information are acceptable when verifying customers. Regulators may have done this on purpose, believing if banks get clear guidelines on what constitutes adequate KYC they will only do enough to meet the requirement and nothing more. This has created a situation where each financial institution, operating in fear of massive fines, has its own procedures and requirements for conducting due diligence.