The mode of currency has also embraced the digital revolution. Since everything has shifted to the use of technology, why should money be left behind? Cryptocurrency is becoming more and more common. Crypto might have its pros, but criminals have made sure that it does not come without the cons. Fraud is integrating into crypto and the anonymity factor in it is making it easier for criminals to take advantage of it. This is why there is an immense need for a KYC regulation for cryptocurrency. In this blog, let us discuss the details of crypto news KYC.
CryptoCurrency and Criminal Activities
FATF is majorly concerned about financial crimes in cryptocurrency. FATF has claimed cryptocurrency to a virtual asset that is of value. According to them, crypto can be used for trading physically, transferred, or for the purpose of investment. It is not considered a representation of fiat currency but it can be used for the purpose of exchange with fiat currency as both are assets of value.
Unfortunately, cryptocurrency is based on the anonymity factor which has led to many financial crimes and this is where the regulatory bodies are worried about. There are no identity verification checks on cryptocurrency and criminals can use it to launder their illegally obtained funds.
Chain analysis, a blockchain analytics firm conducted research and according to them, criminals laundered $2.8 billion in bitcoin in 2019. The total money laundering done through cryptocurrency is up to $761 million. In 2020, the total cost of fraud through crypto theft and hacking have been $1.36 billion.
In order to launder money, what the criminals do is that open up an account with a crypto wallet. The account is opened online and they make the account is opening with a wallet that accepts fiat currency as well. Then they move their illegal funds from one crypto exchange to another and due to the anonymity factor, the trail of the cryptocurrency becomes untraceable. Once that is done, they event their fund’s bank into the fiat currency. And now the money is legalizing and can be used for whatever purpose the criminals want. Money stolen from theft or gambling can be laundered through the means of cryptocurrency.
The Requirement of KYC in Cryptocurrency
According to the FATF, all the member nations must comply with KYC/AML policies for cryptocurrency as well. Since cryptocurrency is of value, it must be regulated like other currencies of value. The regulatory bodies of the EU have laid out The fifth Anti-money Laundering Directive (5AMLD) that includes the clause for crypto news KYC.
FinCEN, another regulatory body has given out rules and regulations for cryptocurrency and recommends that even though the use of cryptocurrency is legal, but it a business related to the service of money and it must have proper KYC/AML regulations. FinCEN also proposed that they must be verified under the same conditions of the Bank Secrecy Act of the 1970s. All the users must be verified and all their information must be recording.
KYC for Crypto News
A digital Solution for KYC in crypto exists that can be a perfect answer to this digital currency. This solution is using AI-powered and using to verify. The identity of the user as well as check their background for AML and give a risk assessment. The initial step for users is to add their personally identifiable information for account enrollment. Their personally identifiable information may incorporate a title, DOB, email, SSN, license number, and monetary data. User uploads their Identity documents issued by the government. The next step for the user is to upload clear scanned images of their ID such as Identity document card, license, or driving license. Optical character recognition technology automatically extracts the information from Identity documents at this level for additional processing.
User can also upload their selfie for the face verification process. For the AML check, the user is verified against the global watchlist, PEP, adverse media, and if they have previously been involved. In any money laundering activities of financial crimes. They will detect and the wallet will be alerted of the risk. This solution takes on a few seconds and the wallet can be compliant with KYC regulations.
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