KYC (know your customer)

KYC is the reason opening any account in your own name starts with an ID document. The term is industry shorthand. The law speaks of customer due diligence, and in Bulgarian law of "комплексна проверка на клиента".

What KYC involves

Article 10 of Bulgaria's Measures Against Money Laundering Act (ЗМИП) lists what due diligence covers:

1. Identifying the customer and verifying that identity from reliable, independent documents, data or information.
2. Identifying the beneficial owner, which matters for companies.
3. Understanding the purpose and nature of the business relationship.
4. Clarifying the origin of funds.
5. Ongoing monitoring of transactions throughout the relationship, to confirm they match the customer's risk profile, and keeping documents up to date.

For individuals, identification uses an official identity document with a photo, and the provider keeps a copy (Article 53). Verification can draw on extra documents, confirmation by another obliged entity, or checks in official databases (Article 55).

Obliged entities include banks and, since the Markets in Crypto-Assets Act, crypto-asset service providers licensed under it (Article 4, point 19). If due diligence cannot be done, the firm must refuse the transaction or the account (Article 17).

The EU framework

From 10 July 2027, most of these rules will come from a directly applicable EU regulation, Regulation (EU) 2024/1624 (AMLR). Its Article 20 lists due diligence measures that also include checking customers and beneficial owners against targeted financial sanctions and determining whether they are politically exposed persons.

Crypto transfers have their own layer. Under Regulation (EU) 2023/1113, in force since 30 December 2024, crypto providers send the names and ledger addresses of the sender and recipient with each transfer, and for transfers above EUR 1,000 to or from a self-custody wallet they assess whether it belongs to their client. DAC8 adds tax residence and tax identification number to the data crypto providers collect.

Example

A freelance translator in Burgas opens a EUR account in her own name to receive about EUR 3,000 a month from agencies abroad. At onboarding she uploads her ID card, confirms her address, and states the purpose of the account and her expected monthly volume.

Six months later a single payment of EUR 25,000 arrives, far above her usual pattern. As part of ongoing monitoring, the provider asks for the invoice or contract behind it. She sends the contract for a book translation, the provider updates her file and the money is processed. Had she refused, the provider could not continue the relationship under the law.

Common confusion

• KYC is not a credit check. It confirms who you are and how you use the account, not whether you can borrow.
• One-time onboarding is not the end. Monitoring continues for as long as the relationship lasts.
• Licensed does not mean less KYC. Authorised CASPs are exactly the firms that must apply these checks.