In plain English
What Know your customer means
KYC commonly involves collecting identifying details, checking documents or reliable databases, screening relevant risk information, and asking follow-up questions where the customer or transaction presents higher risk. For a company account, the firm may need to identify people who ultimately own or control the company. Exact checks vary by law, product, customer location, and the firm’s risk assessment.
Why it matters
KYC helps firms meet financial-crime obligations and can determine whether an account is opened, restricted, or reviewed. It also gives a trader a practical way to assess a broker: a legitimate firm should clearly identify the contracting entity and use a proportionate verification process. Completing KYC does not prove that a broker is safe or that deposits are protected.
Example
A customer opens an account in her own name and submits her legal name, date of birth, residential address, and a government-issued ID. The broker compares the information with reliable sources. If she instead funds an account held by a company, the broker may request incorporation records and details of the company’s beneficial owners before allowing trading or withdrawals.
Quick answers
Common questions
Is KYC required only when an account is opened?+
No. Initial identity verification is a central part of KYC, but firms may refresh records, investigate unusual activity, or request further evidence when a customer’s risk profile, ownership, or transaction pattern changes.
Why does a broker ask about beneficial owners?+
Where the customer is a company or other legal arrangement, the account holder may not be the person ultimately controlling it. Identifying beneficial owners helps the firm assess the relationship and detect potential misuse.
Sources