Tip Sheet - Know Your Customer (KYC) Regulations

Publication language
Date published
01 Jan 2016
The Electronic Cash Transfer Learning Action Network
Tools, guidelines and methodologies
Cash-based transfers (CBT), Principles & ethics, System-wide performance

Know Your Customer (KYC) regulations, also known as customer due diligence, are designed to combat money laundering, terrorist financing, and other related threats to the financial system. They refer to the ID checks that financial institutions perform to comply with national financial regulations. Typically, KYC checks take place when customers sign up for an account or conduct a transaction. However, KYC checks can also occur during events less visible to customers, such as creating customer transaction models and monitoring for unusual activity. Humanitarian agencies are not directly subject to KYC regulations. However, the financial service providers (FSPs) they often partner with are. KYC regulations apply to FSPs whether they are based within or outside the country of implementation. FSPs must comply with them or face fines and penalties. As a result, FSPs apply policies designed to meet KYC regulations for all clients, including humanitarian organizations and their program participants, and tend to be risk-averse.