What does "KYC" stand for and what is its main goal?

KYC stands for "Know Your Customer," and its main goal is to verify the identity of clients to prevent fraudulent activities and ensure compliance with regulatory requirements. The process involves gathering necessary information about a customer, such as identification, financial status, and investment objectives. This helps firms understand their clients better, assess potential risks, and fulfill legal obligations intended to mitigate money laundering and other financial crimes.

Understanding a customer's background and financial situation allows firms to offer suitable investment products and maintain ethical standards in their dealings. By verifying client identities, financial institutions can also limit the risk of involvement in illicit activities, thereby building a safer and more trustworthy financial environment.