KYC (Know Your Customer) is a process by which businesses verify the identity of their customers to prevent money laundering, identity theft, financial fraud, and terrorism financing. This process involves verifying your identity and address using government-issued documents (such as a driver's license or passport).
The purpose of KYC is to combat money laundering, terrorist financing, and tax evasion. Documents that verify the client's identity, such as a passport or other identification document, are used for verification. The set of data used in the verification procedure is established directly by the exchange platform.
The process of verifying customer identities can be manual or automated. Manual KYC involves meeting with a representative of the company to verify your identity in person. Automated KYC systems typically use a combination of technologies to verify your identity remotely:
- Optical character recognition (OCR). OCR software can autonomously interpret and extract data from documents, such as passports and driver's licenses.
- Machine learning (ML). ML algorithms can detect and flag potentially fraudulent patterns in data, such as inconsistencies in customer information or fraudulent transactions.
- Biometric verification. Biometric verification systems can employ facial recognition or fingerprint scans to validate a customer's identity.
Learn more here: KYC: What is it and How Does it Work?
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