Define "KYC" in the context of banking.

In banking, KYC stands for "Know Your Customer." This is a vital process used by financial institutions to verify the identity of their clients and assess the potential risks of illegal activities such as money laundering and fraud. KYC involves collecting and analyzing information about customers, including their financial history, identification documents, and transaction patterns.

The purpose of KYC is to ensure that banks can confidently establish a client’s identity and understand their financial behaviors, thereby facilitating compliance with regulatory requirements. By implementing effective KYC procedures, banks can protect themselves and their customers from financial crimes, enhance transparency, and foster trust in the financial system.

Understanding KYC is crucial for banking professionals, as it plays a significant role in risk management and regulatory compliance. This knowledge helps to create a safer banking environment and maintains the integrity of the financial system as a whole.