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What is KYC (Know Your Customer)?

KYC (Know Your Customer) is the process of verifying a customer's identity before and during a business relationship. Required by financial regulators worldwide, KYC involves identity verification, risk assessment, and ongoing monitoring to prevent fraud, money laundering, and terrorist financing.

KYC is closely related to KYB (Know Your Business), which applies the same verification principles to corporate entities, and AML (Anti-Money Laundering), the broader regulatory framework that mandates KYC procedures.

KYC requirements and process

KYC regulations — enforced by bodies like FATF (Financial Action Task Force) and FinCEN (Financial Crimes Enforcement Network) — require a tiered approach to customer verification:

  • Customer Identification Program (CIP) — The first step: collecting and verifying identity documents (government ID, passport, proof of address). CIP establishes that the customer is who they claim to be.
  • Customer Due Diligence (CDD) — Assessing the customer's risk level based on their profile, business purpose, and expected transaction patterns. CDD determines the appropriate level of ongoing monitoring.
  • Enhanced Due Diligence (EDD) — Additional investigation required for high-risk customers, including Politically Exposed Persons (PEPs), customers in high-risk jurisdictions, and those with complex ownership structures. EDD involves deeper source-of-funds analysis and more frequent monitoring.
  • Ongoing monitoring — KYC is not a one-time event. Regulations require continuous monitoring of transactions, periodic re-verification, and screening against updated sanctions lists and adverse media.

Why KYC is changing

Traditional KYC relies on manual verification — analysts reviewing documents, checking databases, and writing risk assessments. This approach has significant limitations:

  • Slow onboarding — Manual KYC takes 3–4 days per case, creating friction that drives customers to competitors with faster onboarding.
  • High cost — At $25–40 per case, manual KYC costs scale linearly with customer volume. Banks spend $500M–$1B annually on compliance.
  • Point-in-time blindness — Manual checks verify identity at onboarding but miss changes afterward. A customer sanctioned six months post-approval goes undetected until the next periodic review.
  • New fraud vectors — Synthetic identities and AI-generated documents are increasingly sophisticated, defeating traditional document-based verification.

How Salmon approaches KYC

Salmon screens against sanctions lists, PEP registries, and adverse media in seconds — not days. Continuous post-approval monitoring catches status changes automatically. Full audit trail with source attribution on every verification, so compliance teams can demonstrate due diligence to regulators without manual documentation.

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Common questions
Frequently asked questions

Know Your Customer (KYC) is a regulatory requirement for financial institutions and other regulated businesses to verify the identity of their customers, assess risk, and monitor transactions to prevent fraud, money laundering, and terrorist financing. KYC involves identity verification, risk assessment, and ongoing monitoring throughout the business relationship.

KYC verifies individual customer identity. KYB (Know Your Business) verifies corporate entities — checking business registration, ownership structure, UBO (Ultimate Beneficial Owner), and corporate sanctions status. Both are required under AML regulations, but KYB applies specifically to business-to-business relationships and corporate account onboarding.

The KYC process has three main steps: (1) Customer Identification Program (CIP) — collecting and verifying identity documents. (2) Customer Due Diligence (CDD) — assessing risk level and verifying the customer's business purpose. (3) Enhanced Due Diligence (EDD) — additional investigation for high-risk customers, PEPs, or unusual transaction patterns.

Traditional manual KYC takes 3-4 days per case and costs $25-40. Automated KYC platforms like Salmon reduce this to minutes by screening against multiple sources simultaneously and continuously monitoring after approval. The time savings compound significantly at scale — a bank onboarding 10,000 customers per month can save thousands of analyst hours.

Salmon verifies identity in real time against sanctions lists, PEP registries, adverse media, professional credentials, and licensed datasets. Every verification includes confidence scores and source attribution for audit compliance. Continuous monitoring after approval flags status changes automatically — new sanctions listings, adverse media hits, or role changes that affect risk classification.