There are four reasons why KYC is necessary:
Establish customer identity — Customer identity validation is highly important because it establishes that clients are who they say they are. This step is necessary to avoid identity theft and other criminal activities that could endanger clients.
Learn the client’s needs — KYC can also be used in investments to understand a client’s risk tolerance, investment goals, and needs in order to give them well-informed suggestions for investment instruments that could grow their financial portfolios.
Understand the nature of customers’ activities — In many use-case scenarios, KYC systems also monitor banking transactions to understand a customer’s activities to qualify whether a person or corporation’s funding sources are legitimate.
Prevent cheating, money laundering risks — One of the most important use-cases of KYC is to protect the platform from cheating & money laundering and spot any suspected illegal activity that could point towards under-valued corporations, questionable money sources, and even illegal trade.
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