Glossary
Know Your Customer (KYC)
The process of verifying a customer's identity as part of onboarding and ongoing AML obligations.
Definition
Know Your Customer (KYC) is the set of procedures used to verify a customer's identity, understand the nature of their activity, and assess their risk. KYC is the foundation of anti-money-laundering (AML) compliance.
Regulatory context
KYC is mandated by FATF-aligned AML regimes worldwide (in the US, the Bank Secrecy Act and FinCEN rules). It includes Customer Identification Program (CIP), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD) for higher-risk customers.
Who it affects
Banks, money services businesses, VASPs, and other regulated financial institutions. The obligation attaches to the regulated entity, not to unregulated individuals building agents for personal use.
Relevance to AI agents
KYC and sanctions screening are distinct. An agent that screens a counterparty against OFAC is performing a sanctions check; verifying the counterparty's identity is KYC. Production payment agents typically need both, often combining an identity vendor with a sanctions API.
SanctionsAI coverage
SanctionsAI performs sanctions screening. KYC verification of identity is a separate process, typically handled by a dedicated KYC vendor.
FAQ
1. Is KYC the same as sanctions screening?
No. KYC verifies who the customer is; sanctions screening checks whether they are on a sanctions list. They are complementary.
2. Do crypto agents need to do KYC?
If the agent's operator is a regulated entity, yes. For non-regulated builders, KYC may not be legally required but sanctions screening still is, under OFAC's strict-liability regime.
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