What does "know your customer" (KYC) refer to in financial services?

"Know your customer" (KYC) in financial services refers to the process of identity verification and client suitability assessment. This fundamental principle involves financial institutions gathering relevant information about their clients to ascertain their identity and comprehend their financial activities, thereby ensuring that services provide are suitable for the client's needs.

The KYC process includes verifying clients' identities through documentation and conducting risk assessments to prevent fraud, money laundering, and other illicit activities. By implementing robust KYC procedures, financial institutions can foster solid relationships with their clients while adhering to regulatory requirements that aim to promote integrity in the financial system.

The other options relate to different aspects of financial services but do not encompass the comprehensive nature of KYC. Assessing creditworthiness pertains specifically to lending and borrowing, predicting market trends is more aligned with market analysis and research, and while KYC is indeed a regulatory requirement, it is not exclusively about trading stocks. Each of these aspects serves a different role in financial services but does not replace the foundational concept of KYC, which focuses on understanding and verifying clients.