Know Your Customer (KYC)
Compliance processes to verify the identity, risk profile and legitimacy of individuals or entities interacting with AI systems, especially in regulated industries.
Definition
A set of due-diligence procedures—identity verification, document authentication, risk-scoring—that organizations implement to prevent money-laundering, fraud, and other illicit uses of AI platforms. KYC for AI may include screening users against sanction lists, performing enhanced due-diligence for high-risk profiles, and maintaining audit logs of verification steps. Automation can accelerate KYC, but governance ensures human review for flagged or ambiguous cases.
Real-World Example
A cryptocurrency exchange uses AI to cross-verify user IDs (passport, driver’s license) via facial-recognition checks and flags any mismatches. Suspicious or high-risk accounts (e.g., from sanctioned regions) are escalated to compliance officers for manual review before allowing any transactions, ensuring regulatory compliance and reducing illicit activity.
.svg)
