Banks, lenders and other regulated firms use KYC to confirm that a new customer is who they claim to be and to flag anyone who poses a higher risk of fraud or money laundering before opening an account. In the United States, this usually means running a Customer Identification Program that collects a name, date of birth, address and identification number, with deeper checks for higher-risk customers.
KYC is not a one-time check. Regulated businesses are expected to keep monitoring the relationship afterward, since a customer's risk profile can change, and to keep records that show the checks were actually done. The common misconception is that KYC only applies to banks. Broker-dealers, money services businesses and other regulated financial firms carry their own version of the same requirement.