Know your customer (KYC)

Know your customer (KYC) is the banking industry label for the controls that identify and verify a customer, understand the purpose of the relationship, and identify beneficial owners before and during a business relationship. The binding regulatory concept behind KYC is customer due diligence (CDD); KYC is desk shorthand for the identification and verification measures that CDD requires for natural and legal persons.

How know-your-customer work is used on EF, PF and CRE desks

Export finance, project finance and commercial real estate files typically involve borrowers, sponsors, guarantors, offtakers and layered holding companies. Desks run KYC at onboarding and on a risk-sensitive ongoing basis so that credit approval, sanctions screening and financial-crime escalation rest on verified identities and ownership. The European Banking Authority's ML/TF Risk Factors Guidelines require firms to identify the customer and, where applicable, the beneficial owner, before entering a business relationship or carrying out an occasional transaction, and to verify identity using reliable, independent sources. Extent of measures is risk-sensitive: simplified where risk is low and national law permits, enhanced where risk is increased.

Distinctions within the control stack

KYC is not sanctions screening, though verified names feed list matching. It is not adverse media screening, which reviews open-source allegations as a risk input. Ultimate beneficial owner identification is a required element of CDD for legal persons, not a separate optional product. Enhanced due diligence for higher-risk relationships, including politically exposed persons and high-risk third countries, sits on top of standard KYC rather than replacing it. The international standard-setter behind these national rules is the FATF; desks implement KYC through the national law and regulation that transposes FATF recommendations, not through direct application of FATF's own text.