Know your customer (KYC).

In plain English

Know your customer covers collecting name, date of birth, address, and a taxpayer or government identification number, verifying them against reliable records, and rating how much risk the customer presents. The account opening piece is called a customer identification program, and ongoing monitoring is what keeps the picture current as behavior changes. Higher risk profiles trigger enhanced due diligence, which can mean documenting the source of funds or identifying the real people behind a business entity. Firms must also check names against government sanctions lists before opening an account. The requirements apply to brokerages, money transmitters, and crypto exchanges, not only to banks.

01Why it matters

These checks are why account opening asks for documents, and they are also the first line of defense that keeps someone else from opening an account in your name.

02The math, step by step

Say a small business applies for an account. The bank collects the owner's identification, the entity's tax identification number, and formation documents, then identifies anyone owning 25 percent or more. Three owners at 40, 35, and 25 percent means all three get verified.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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