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KYC 101: What is it and why should i do it?

April 25, 2022

KYC 101: What is it and why should i do it?

April 25, 2022

KYC: Know Your Customer

If you have an account on cryptocurrency exchanges, you must have heard of KYC. If you haven’t, let us tell you in advance; It will be one of the first concepts you will encounter after becoming a member. KYC consists of the initials of ‘Know Your Customer’ or ‘Know Your Client’. So, what exactly is KYC? What does it do? Why do financial services companies use it? In this article, we will answer your questions about Know Your Customer policy.

KYC protocol is an essential tool for digital security.
KYC protocol is an essential tool for digital security.

What is KYC?

KYC, which is generally used by financial structures, is actually a ‘recognition’ system. All of the fraud and theft incidents we hear frequently, both on digital platforms and in our daily lives, are for financial gain. There may also be a risk of encountering such events when things go digital. This is where KYC comes into play. It really provides a strong protection against unwanted events such as identity theft. In addition, it acts as a good defense mechanism against international organized crimes such as money laundering.

KYC usually starts with the first contact between the customer and the financial institution. If you do not follow the KYC procedures, you may not be able to benefit from all services. However, if you do, you can enjoy all the functions. In addition to all these, no one can create an account or request a withdrawal with your information. You can think it like this; Whatever you do when you physically go to a bank, you must show your identity first and prove that you are actually and legally the person you claim to be. You can think of KYC this way too.

KYC provides an extra layer of security.
KYC provides an extra layer of security.

In accordance with the KYC procedures, you may be asked for information such as your identity, invoice or residence information. Thanks to such documents and biometric recognition, your account is almost never accessible to anyone but you. Actually, in a way, you are confirming the information you entered when registering. The information you provide in the entry is matched with the information in the documents you sent and the confirmation takes place. In this way, companies get to “know you”.

What does “know you” mean? As we mentioned above; It secures both you and the company providing the relevant service and minimizes the possibility of illegal activities such as money laundering under any false names.

In addition to the high protection it provides, KYC also plays a role in increasing the quality of digital services. KYC, which is one of the most important elements that protects you even when buying Bitcoin or other cryptocurrencies on cryptocurrency exchanges, provides financial institutions with the opportunity to provide you with the most appropriate service after getting to know you. Since investing is shaped according to individual strategies and methods, getting personalized service is also very important in this context.

Can the Information I Use While Authenticating KYC Be Stolen?

The information you use while authenticating KYC is stored in the database of the financial institution where you perform the process and is completely closed to third parties. This information is only used in situations that require verification of your identity. In case your information is stolen or used without your consent, the financial institution responsible for the security of your information is held legally responsible and legal actions are taken accordingly.

Conclusion

KYC refers to the verification of the information entered in order to ensure security, especially in financial structures, through the requested documents. KYC is specifically used to prevent illegal activities such as money laundering, identity theft or making transactions with fake identity. In addition, it plays a key role for companies to get to know you in order to ensure that you receive personalized service.

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