Know your customer

The obligation on a regulated firm to identify its customer, verify that identity, and understand the purpose of the relationship before providing services.

also known as: KYC
reviewed: 2026-08-20

Cite this page

APA 7

Sanctions Evasion Reference. (2026, August 20). Know your customer. https://sanctionsevasion.org/reference/glossary/know-your-customer/

Chicago

Sanctions Evasion Reference. “Know your customer.” Last reviewed August 20, 2026. https://sanctionsevasion.org/reference/glossary/know-your-customer/.

BibTeX

@misc{ser-reference-glossary-know-your-customer,
  author = {{Sanctions Evasion Reference}},
  title  = {Know your customer},
  year   = {2026},
  note   = {Last reviewed 2026-08-20},
  url    = {https://sanctionsevasion.org/reference/glossary/know-your-customer/}
}

The date is when this page was last reviewed, not when it was first published.

KYC is the identification stage: establishing who the customer is and, where the customer is an entity, who ultimately owns and controls it. It is a precondition for everything else, because screening a name you have not verified tests nothing.

Every corporate concealment technique on this site is ultimately aimed at KYC: the objective is to supply a customer identity that is real, verifiable and not the party actually behind the transaction.

Where this term is used

What is a front company? — A front company is a business that trades normally but exists largely to hide another party's involvement in its transactions. The real activity is the cover; the concealed party is the point.
What are nominee directors and nominee shareholders? — A nominee is formally recorded as a company's director or shareholder but acts on an undisclosed party's instructions. The register names the nominee; the decisions belong to someone else.
What are third-country bank accounts and how are they used? — Holding accounts in a jurisdiction unconnected to the restricted party, the goods or the contract, so that payments reach and leave the restricted economy without ever appearing to touch it.
How do gaps in acquisition integration create sanctions exposure? — A company buys a foreign business and keeps running its systems separately, so the acquired unit's transactions never pass through the parent's sanctions screening until someone thinks to connect them.
What happens when sanctions-screening controls go untested? — A firm builds real geo-blocking or screening controls, then never independently tests whether they still work, so a bug, a disabled setting or a discontinued tool runs unnoticed for months or years.

Related terms

Customer due diligence — The ongoing process of understanding a customer's identity, ownership, expected activity and risk, and checking that actual activity remains consistent with it.
Beneficial owner — The natural person who ultimately owns or controls an entity, or on whose behalf a transaction is conducted, regardless of whose name appears on the register.
Screening — Automated comparison of names, identifiers and other transaction data against sanctions lists and internal watchlists, at onboarding and on each payment.

Sources

The FATF Recommendations. Financial Action Task Force, 2025.
Correspondent banking principles and guidance. The Wolfsberg Group, 2022.

All glossary terms