KYC/AML
KYC check: what is it and where is it used
What is the KYC procedure and why is it paid so much attention? We’re going to tell you how it can protect you against fraudsters maintaining your anonymity. KYC- and AML checks: why verification is necessary in the cryptocurrency field. KYC (Know Your Customer) is a procedure for verifying the client's identity and assessing their potential risks. But why is it necessary and why today it’s almost impossible to buy cryptocurrency if you didn’t verify your identity? Doesn’t it contradict the initial principles of anonymity and decentralization of the crypto industry? Today we’re going to figure out why KYC- and AML checks are needed and how they work. We’ll also tell you how verification helps to reduce the number of frauds while maintaining the basic anonymity of users.
What is AML and why do you need it?
Anti-Money Laundering is a set of measures to counter money laundering, the financing of terrorism, and the creation of mass destruction weapons. This procedure includes the identification, storage and mutual exchange of information about clients, their profits and transactions between financial institutions and government agencies. Most classical financial institutions use AML measures to check a business that works with cash or uses cash as one of the main assets. They also check those enterprises that have money in different accounts, regularly transfer them to other countries and banks, buy futures and other instruments for cash settlement. In other words, all businesses that can potentially bypass financial monitoring and launder funds fall under verification.
What does address verification show?
Total risk (in percent) – the probability that the address is associated with illegal activity. Risk sources - known types of services the address interacted with, and the percentage of funds received from/given to these services, for which the total risk is calculated.
Why does the service insist on AML procedures?
If the service does not carry out such checks, frauds will be able to use it as a platform for money laundering and terrorism financing. And then the service will be held accountable. That’s why exchanges and other large cryptocurrency companies implement AML requirements in their business and conduct regular KYC verifications.
How to understand risk assessment?
- 0−25% − a clean wallet/transaction
- 25-75% - the average level of risk;
- 75%+ − this wallet/transaction is considered risky
The risk is 50% but I’m sure that the address is reliable. What to do? The results of the check are based on international bases, which continuously update. That’s why the address, which was 0% risky yesterday, could get or give an asset to a risky party today. In this case, the risk assessment changes.
- 25-75% - the average level of risk;
- 75%+ − this wallet/transaction is considered risky
The risk is 50% but I’m sure that the address is reliable. What to do? The results of the check are based on international bases, which continuously update. That’s why the address, which was 0% risky yesterday, could get or give an asset to a risky party today. In this case, the risk assessment changes.
