KYC is the process a business goes through to verify the identity of its customers, and better understand its customers and their financial affairs. The term is mainly used in the banking and finance industry and can mean one of two things:
The Corporations Act 2001 requires advisors who give financial advice or sell financial products to know their customer, ensuring they receive appropriate advice or products that are suitable for them. This is regulated by the Australian Securities and Investments Commission (ASIC).
Banks and other entities (defined by the Act) are required by law to know their customers – that is, who they are doing or proposing to do business with. The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 provides the legal framework and establishes obligations.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) oversees compliance with the Act. It is Australia’s financial intelligence unit and also its anti-money laundering regulator. AUSTRAC oversees the compliance of more than 14,000 Australian businesses ranging from major banks and casinos to single-operator entities.