Definition:
Know Your Customer (KYC) is a process used by financial institutions to verify the identity of clients and assess risks associated with them. It includes identity verification, background checks, and transaction monitoring.

Contextual Explanation:
KYC is essential for PSPs and financial firms to prevent fraud, money laundering, and identity theft. It ensures customers are legitimate and reduces financial risks.

Why It Matters:
Effective KYC practices help businesses comply with regulations, protect against fraud, and foster customer trust. Non-compliance can result in penalties and legal issues.