KYC is the process for financial services firms to verify the client’s identity. The firms are required, by law, to comply with KYC requirements. Although applicable for most businesses, KYC regulations are especially stringent for firms in financial services, banking, and other allied businesses such as insurance, equities trading, etc.
The KYC system requires clients to prove their identity with legally admissible evidence. Verifying the client’s identity is undertaken to prevent the possibility of having business relations with clients who might be corrupt, money launderers, etc.