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Guide to know your customer procedures

Learn about the KYC process designed to prevent financial crimes — and what it means for your crypto.

Know your customer laws — more commonly called KYC laws — refer to the policies, procedures and systems used to prevent financial crimes. whereby a business verifies the identity of its clients. It’s a mandatory process for banks, lenders, insurance providers and any other money service business. The KYC process allows companies to verify that customers and clients are who they claim to be and confirm they aren’t engaging in criminal activities through using their services.

KYC processes vary across institutions and may require different types of information, including government-issued ID. Yet because cryptocurrency is a gray area, some exchanges require immediate verification of users while others don’t require it until fiat is involved.

Here’s what to know about KYC, including personally identifiable information you may be required to submit, why it’s necessary and basic steps to getting verified.

Disclaimer: This page is not financial advice or an endorsement of digital assets, providers or services. Digital assets are volatile and risky, and past performance is no guarantee of future results. Potential regulations or policies can affect their availability and services provided. Talk with a financial professional before making a decision. Finder or the author may own cryptocurrency discussed on this page.

Why is KYC required to buy cryptocurrency?

KYC is in place to confirm that money used to buy cryptocurrency doesn’t come from illegal sources and isn’t used to, say, launder money or finance terrorism.

Crypto banks that operate within the US must be licensed by the Financial Crimes Enforcement Network (FinCEN) and abide by anti-money laundering (AML) rules and regulations. It means that crypto exchanges are required to report suspicious activity and put in place a strong AML program that includes standard KYC procedures when onboarding and verifying users.

Crypto services are able to gain an understanding of their clientele, reject applicants with questionable backgrounds and monitor client activities while managing risk.

Is KYC required by law?

Yes, banks, lenders, insurance providers and other financial institutions are legally required to comply with KYC laws. However, it’s interpreted as applying to cryptocurrency exchanges that deal with fiat currencies, like the US dollar.

Because of this, some exchanges allow you to deposit and trade crypto you already own, requiring KYC protocols only when you purchase digital assets with fiat. Others require it even just to trade crypto and not fiat.

What type of information is needed for verification?

The most common information and documents needed to pass KYC are:

  • Full name
  • Date of birth
  • Phone number
  • Email address
  • Physical address or country of residence
  • Occupation
  • Photo or scan of government-issued ID
  • Copy of a utility bill with address that matches physical address provided
  • Selfie that includes name, date it was taken and a verification code, if requested

Steps to passing KYC

Procedures vary by platform, company, brand and service but follow a series of general steps that include registration, documentation and identity confirmation.

Step 1. Register with the site

The first step to passing KYC is to register with platform or service you’re interested in:

  1. Enter an email address or phone number
  2. Create a password
  3. Verify the email or phone number provided by entering a verification code
  4. Agree to terms and conditions
  5. Complete and submit registration

KYC - Sign Up Page

Step 2. Submit personal information

Depending on the platform, personal information can include your name, country of residence, an ID and your address. You may need to upload a photo of your ID or enter ID or record numbers from it.

The best ID to use for KYC is a passport. Passports are standardised by nation, whereas something like a driver’s license varies by state or province within a country.

KYC - Individual Verification page

Step 3. Upload required documents

Your platform or service may require a copy of a utility bill or bank statement to confirm that your address and name matches the ID provided. This is to confirm that you live at the address provided and aren’t in another country.

KYC - Upload Identity Document page

Step 4. Upload a selfie

A final step can include submitting a photo that’s a full view of your face. You often are required to hold a piece of paper that has your name and the current date written on it. Some sites also provide a unique code for you to include on the piece of paper.

This step is required to ensure that the person registering for the account matches the ID provided. Selfies are either manually checked against provided ID photos or completed with biometric AI.

How long should it take for me to pass KYC?

Passing KYC can take from a few minutes to a few days. Some platforms rely on dedicated teams or AI to quickly check over and approve new clients’ KYC information.

You can speed up the process by providing all information required, including clear photos of ID documents and a clear selfie.

Is it safe to upload a photo of my driver’s license or passport?

It depends on the platform or service, though look for a privacy statement that details the security policies in place to protect your information before, during and after the KYC verification process.

Stay alert to scams that use KYC as a guise to steal personal information. You should never be asked to complete KYC procedures or submit personal information over the phone or by email. If you’re unsure, contact the platform or service directly to confirm next steps.

Is KYC exclusive to cryptocurrency exchanges?

No, banks, investment platforms and other tradfi services are required to comply with KYC procedures. While its application to cryptocurrency is recent, KYC precedures were put in place in 1989 as an effort to prevent fraud, tax evasion, terrorism financing, money laundering and other financial crimes in traditional financial and non-financial infrastructures.

Can I buy cryptocurrency without KYC?

You may be able to find exchanges that allow for account registration and trading cryptocurrencies outside of KYC procedures. You typically must already own cryptocurrency and deposit it onto the site to begin trading.

Purchasing crypto with fiat isn’t possible without complying with the KYC process. Platforms that don’t require KYC to trade crypto assets will ask for personal information as soon as fiat is involved.

Exchanges are starting to require users to go through KYC regardless of whether fiat is involved, however. If you encounter any exchange that doesn’t require KYC yet allows you to deposit fiat, it could be a scam.

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