KYC checks involve financial institutions collecting relevant customer information to ensure the user is who they say they are and to prevent fraudulent activity. Documentation collected includes identification documents (passport, driver’s license, or government-issued identity card and other documents as proof of address, such as bank statements and utility bills. KYC checks are mandatory and many exchanges enforce an identity check before allowing users to perform transactions.
For Binance, users can create an account without verifying their identity, but they will have limited access to trading and other activities until they complete their KYC.
KYC regulations differ from country to country, though there is general agreement on the basic information required for a KYC check, such as full name, date of birth, and residential address. Presently, the Financial Action Task Force (FATF) is a policy-making body that helps to coordinate KYC compliance.
KYC checks can help prevent bad actors from exploiting exchanges, thereby supporting broader Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) efforts.
What’s more, blockchain transactions on decentralized exchanges (DEXs) are likely to be irreversible. This makes it harder, or even impossible, to retrieve illicit funds from bad actors. As such, we want to ensure KYC compliance to a rigorous standard in order to prevent bad actors from operating on our platform.
There are three main benefits of KYC:
Increased security and accountability of financial service providers.
Combating illicit activity, such as identity theft and financial fraud.
Reduced risk of money laundering and terrorist financing.
KYC processes are becoming a crypto industry standard and are functioning as an additional layer of protection against bad actors. While users may find KYC checks troublesome, exchanges like Binance, which enforce AML practices and KYC checks, offer users peace of mind when trading or conducting other crypto activities.