What's KYC?

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Andrew Goldman

Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.

Though KYC may sound like a trademark-skirting name for a third-rate fried chicken chain, it’s in fact an acronym that stands for “Know Your Client” — and if you’ve opened any kind of bank or brokerage account anytime in the last 20-plus years, you’re probably familiar with KYC in practice even if you’ve never actually heard the term.

KYC means that a bank must get documentary evidence of who exactly is holding an account with them—by securing a name, address, a Social Insurance Number, as well as some form of official photo ID like a driver’s license or passport. Though it might seem like banks are just particularly nosy by nature, they’re legally obligated by the Canadian government to secure this information from you, just to make sure you’re not some ne’er-do-well seeking to, say, launder millions in cocaine sales in their bank vault or horde funds on behalf of a terrorist cell — so, you know, basic evildoer prevention safeguards.

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There's also an extension of KYC laws known as KYB, or "Know Your Business." They're basically the same as KYC requirements, but extend to business accounts and are used to thwart money-laundering or otherwise illegally-inclined businesses. It includes verification of registration credentials, location, the UBOs (Ultimate Beneficial Owners) of that business, as well as a screener to ensure that the business in question wasn't involved in any sort of criminal activity.

Though KYC regulations are gradually becoming standard in all industrialized countries, they first became law in the Canada as part of the 1991’s Proceeds of Crime (Money Laundering) Act, and were expanded in December 2001 under the post-9/11 Anti-Terrorism Act to include government mandated rules to deter terrorists from operating within the Canadian banking system. So, unless you’re Pablo Escobar Jr. or Lex Luthor, you should feel just fine about the KYC intrusion.

Last Updated October 2, 2020

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