Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

What is KYC an acronym for in financial compliance?

1. Know Your Customer

2. Keep Your Credentials

3. Knowledge Yield Compliance

4. Know Your Certificate

The correct answer is: Know Your Customer

The acronym KYC stands for "Know Your Customer." This term is a fundamental concept in financial compliance, particularly in the context of anti-money laundering (AML) and combating the financing of terrorism (CFT). KYC refers to the process of verifying the identity of clients and assessing their suitability, along with understanding the risks of illegal intentions towards the business relationship. It involves collecting and verifying information about customers, such as their name, address, and identification, to ensure they are who they claim to be and to detect any suspicious activities. Implementing KYC procedures is essential for financial institutions to mitigate risks associated with functioning in compliance with regulations designed to prevent financial crimes. It allows institutions to maintain a thorough understanding of their clients, ensuring that they do not facilitate criminal activities under the disguise of legitimate transactions. Thus, "Know Your Customer" encapsulates the critical importance of identity verification and risk assessment in the financial sector.