What is the purpose of Know Your Customer (KYC) processes?

• A. To collect marketing data and profile potential customers.
• B. To verify client identity, assess risk, prevent illegal activity, and tailor advice to the client's profile.
• C. To assign account numbers and categorize accounts.
• D. To keep records for tax purposes.

Answer: (B)

KYC is about knowing who a client is, assessing the risk they pose, and watching for any sign of illegal activity. Verifying identity with reliable documents, understanding where the funds come from, and figuring out the appropriate level of due diligence lets a financial institution tailor its guidance and products to the client’s profile while continuously monitoring for unusual activity. This approach helps prevent money laundering, fraud, and terrorism financing, and keeps regulatory compliance front and center. While records are kept for governance and compliance, the primary aim isn’t marketing data, simple administrative tasks, or tax record-keeping.