KYC (Know Your Customer) is the identity verification process that banks must perform before opening accounts, issuing loans, or providing services. You submit identity proof, address proof, and photographs, and the bank verifies you are who you claim to be.
KYC exists to prevent money laundering, terrorism financing, tax evasion, and fraud. Banks must verify customer identity, understand the nature of their activities, and assess money laundering risks. Failure to comply results in massive fines — HSBC paid $1.9 billion in 2012 for KYC/AML failures.
India revolutionized KYC with eKYC using Aadhaar biometrics — opening a bank account in minutes instead of days. Video KYC (V-KYC) allows remote verification via video call. Globally, banks spend over $30 billion annually on KYC compliance. KYC must be updated periodically (every 2-10 years depending on risk category).