Blog

KYC and AML Compliance can help cryptocurrencies to earn legitimacy

Ashley Williams
July 11, 2018
4 minutes read
3507

Cryptocurrencies are currently limited in use by virtual currency enthusiasts or by lottery bidders who are in to for the easy money , promised by cryptocurrencies’ volatile prices. Genuine KYC practices and AML compliance measures can help cryptocurrencies earn much needed legitimacy in the eye of not only national regulators but also in the eye of general populace. To be honest, right now cryptocurrencies are haunted by the reputation of a “monetary tool for cyber criminals”. Last years, ransomware attacks and the demand of hackers to be paid in bitcoin did no good to the reputation of cryptocurrencies. Conventional and status quo forces in financial world are already paying big bucks to downplay the utility and scope of cryptocurrencies. Reliable and easy to use KYC services can help cryptocurrencies to garner the repute like conventional means of transaction. AML Compliance will also give the financial regulator a break from continually cracking down on individuals and exchanges dealing in cryptocurrencies.

Why Cryptocurrencies need KYC and AML Compliance?

The potential of cryptocurrencies is hugely substantial with a decentralized economy where each application or blockchain based venture can have its own specific cryptocurrency to perform transactions and buy assets & items. Cryptoxchange make it even easier to pay from one currency to another

The surge in interest meant many cryptocurrency exchanges, where coins are traded, were overwhelmed with demand. Many of the biggest closed their doors to new customers as they grappled with a backlog in customer verification. While crypto remains a largely unregulated space, regulators around the world have signalled they are watching it closely. Crypto companies have been proactively following the kind of ID checks and money source verification that are commonplace in the world of regular finance in a bid to head off any future regulatory troubles.

AML Compliance for cryptocurrencies

Thanks to blockchain technology, crypto-currencies inherently possess the potential to actually reduce AML risks when compared with fiat currencies. The blockchain is an online public ledger, where each transaction is supervised, validated and recorded as a complete transaction history. Public ledger viewers and crypto-miners are immediately notified of any transfer from one holder to another. Furthermore, unlike counterfeit hard-currency, which governments spend significant sums trying to combat, crypto-currencies are almost impossible to forge as each carry their own unique characteristics, which are verified from end-to-end by miners. Without verification of all transaction phases, including the departure wallet, the destination wallet, the currency type and amount, the transaction is blocked instantaneously without any human supervision. In this sense, the digital trail could better serve AML regulations than existing fiat paper trail.

In order to perform a much more effective KYC and utilise AML Compliance services, cryptocurrencies must have to turn to reliable ID verification solutions. As we have seen in recent pasts, even the liberal financial regulators have started clamping down and fining crypto exchanges for being involved in money laundering activities. If crypto enthusiasts and bigwigs in virtual currency sphere want to rid their products from unwanted financial criminals and there can be no better alternative then Shufti pro. It is an end-to-end ID verification SaaS product utilising the mechanics of Artificial Intelligence. KYC services from Shufti Pro will help crypto exchanges and management of ICOs to ascertain the identity of users that sign up for their virtual currencies or show interest in them at the time of ICO. AML compliance solution will help them to get rid of financial risk posing investors, no matter which part of the world they belong to.

Shufti pro has an industry best processing time of 30-60 seconds when it comes to KYC services. Documents printed in every language of the world can be verified by Shufti pro and its services are available in every country of the world. AML Compliance by Shufti Pro is performed with the help of back ground checks using a mega databank that contains data from 1000 Whitelists and Sanction Lists. In addition to that, Shufti Pro databank includes profiles from 3000 databases maintained by national, international and regional watchdogs.

Recommended For You:

AML & KYC Compliance: 5 Ways AI is Supporting the Fight Against Financial Crimes

Disclaimer: No warranty is herein provided that the information contained in this document is accurate, up-to-date, and/or complete. In no circumstance(s), does such information constitute legal or any other advice. Any person who intends to use, rely, pass-on, or re-publish the information contained herein in any way is solely responsible for the same. We suggest to verify the information and/or obtain expert advice independently if required.

Latest News

News
Money Laundering Becomes Another Cause of Poverty, Says UN
Why Cryptocurrencies need KYC and AML Compliance?
According to the latest UN’s report, over 10% of the world’s wealth could be hidden in overseas banks. The UN calls for global banking reform in its report.

Billions of people around the world have become a victim of poverty due to the tax abuse and corruption leading to money laundering. The UN’s report is asking for a global investigation.

The financial integrity for sustainable development panel of the United Nations is urging the governments to reform the tax rules and the banking system to help end poverty by tackling this emergency. It is said that while the governments were facing rigid financial stress due to the pandemic, criminals were busy hiding their illicit wealth offshore.

Leaders of the world, governors of central banks, businesses and representatives of the society agreed that the criminals were involved in the laundering of assets worth 2.7% of global GDP per year.

Ibrahim Mayaki, the co-chair of the panel and former prime minister of Niger, said: “Closing loopholes that allow money laundering, corruption and tax abuse and stopping bankers, accountants and lawyers from enabling crime are steps in transforming the global economy for the universal good.”

The High-level Panel of International Financial Accountability, Transparency and Integrity (Facti) say in this final report that the corporation is required between the countries to put sanctions on the enablers of these financial crimes.

The report also calls for progress towards digital companies and strong measures to increase the transparency of the ownership of the company and public spending.

Dalia Grybauskaitė, the co-chair of Facti and former president of Lithuania, said: “Our report rests on two simple ideas: restore public finance by fixing a broken system and use the trillions of dollars released to eradicate poverty, recover from Covid and tackle the climate crisis.”

These requirements are required due to the coronavirus pandemic as it blew holes in the financial system of countries around the world.

Recent Posts

Blog
Shell Companies and Money Laundering: How to Combat Them?
Why Cryptocurrencies need KYC and AML Compliance?
Shell companies are notorious for all the right reasons. These entities often called ghost companies are frequently used by fraudsters to launder black money. Shell companies are business entities without any actual premises, employees, or operational assets. They are created by registered agents to conceal ownership information from other businesses. This gives them the anonymity to hide ill-gained funds, avoid tax payments, and bypass AML regulations.

When it comes to developing B2B relationships, businesses should keep a vigilant eye on their partner entities. Verifying important details like corporate documents and addresses can save honest entities from associating unwanted ties with fraudulent companies. Business Verification, referred to as Know Your Business (KYB), and Anti Money Laundering practices help address this problem by taking down shell companies registered only on papers.

This blog describes how shell companies are used in money laundering, what role global authorities have played in preventing them, and how it can help enterprises in the long run.

How do Shell Companies Launder Money?

Sell companies usually claim cash transactions on behalf of their customers to launder money. Multiple transactions increase anonymity and reduce the chances of tracing the original recipient. Money launderers then deposit funds into the company that are transferred to the criminal’s account by creating false invoices.
Global Efforts – Crackdown of Shell Companies

Global regulators and financial authorities have played an active role in the fight against fraudulent companies hiding their identity. In order to combat financial crime through shell companies, some efforts made by law enforcement departments are listed below:

Corporate Transparency Act (CTA) – USA

According to guidelines stated in the Corporate Transparency Act, businesses operating in the United States have to provide FinCEN – Financial Crimes Enforcement Network – with the information regarding the beneficial ownership of their company. This law was introduced in 2019 to prohibit all anonymous shell companies run by criminals for money laundering and illegal proceeds. The Transparency Act defines beneficial owners as someone:

Having a 25% or more share in the company’s revenue

Is responsible for controlling the business entity

Who Receives benefits from the business’ assets

Person with Significant Control (PSC) – UK

Authorities under the UK government define beneficial owners as PSC – a Person with Significant Control. As per the laws, a person is not allowed to run a business if they fail to record details about a company’s PSC during incorporation. Below are identifiers that help identify PSCs, according to the UK:

An individual with more than 25% of the company shares

A significant authority (more than 25% voting rights) in the company

An administrator having the right to appoint and remove executive officials

With the PSC reform in place, companies in the UK need to disclose “beneficial ownership” information which will help identify shell companies helping money mules launder dirty money. The PSC registry, having all the essential company information, stops fraudsters from obscuring their identity behind these illegitimate entities.

Combat Shell Companies with…

Business Verification

Business verification often termed as Know Your Business (KYB) is a corporate due diligence process which a business performs to verify other partner entities. It enables enterprises to devise policies and procedures to detect suspicious activities and prevent money laundering. With KYB checks, corporations can make sure they are conducting business with real and legitimate entities, and not another shell company.

KYB verification for corporate entities also helps them comply with the CTA, and Anti Money Laundering directives by the EU. By cross-checking against business filings, networks, and financial statements of a company, an automated business verification allows an enterprise to stay AML compliant.
Risk-based AML Program

Business entities are required to comply with recommendations of the FATF and other global regulations to prevent money laundering. An AML compliance program based on proper risk assessment for customers and partner entities can address the regulatory requirements. These programs help identify the risk associated with shell companies that are frequently involved in financial crime.

What Should the Program Include?

When it comes to onboarding business associates, a company’s AML program should focus on Ultimate Beneficial Ownership (UBO), nature and amount of transactions and business activities. The compliance officer should connect data points to verify the stakeholders and transactional flow of the company.

Red Flags

Below are some red flags which a risk-based AML program should consider when verifying corporate entities:

Is there any difficulty in obtaining ownership information about the company?

Do the company’s transactions align with its business profile?

Any payments listed without a proper purpose or date

Transactions involving large sums of money with other shell companies

The company performs frequent transfers to multiple beneficiaries

Watch list Screening

Beneficiaries of shell companies are often placed on adverse media lists due to the amount of risk they pose to a business. This can cause a customer’s risk profile to change allowing firms to conduct additional screening of these users. Politically Exposed Persons (PEPs) list includes individuals with a higher AML risk. Ongoing monitoring of PEP status can help enterprises to identify and take down potential financial crime.

Ongoing Transaction Monitoring

The red flags defined in the AML program can help corporations identify companies offering illicit services. Shell companies often involve unusual transaction patterns which could be detected through a transaction monitoring solution. Ongoing AML monitoring of corporate entities also helps identify high-risk companies which could possibly be involved in money laundering and other cybercrime.

Address Verification

Verifying a corporation’s address can help businesses find out if it’s a shell company or not. Since these entities only exist on paper and do not have any physical premises or personnel, they are easy to spot. An address verification solution powered by artificial intelligence can quickly check for possible hidden information including addresses and corporation dates to identify ghost entities operating for illicit purposes.

To Sum It Up …

Although shell companies are not always created with an ill intention, their ability to hide ownership identity makes them suspicious. Fraudsters exploit this aspect to their benefit for cleaning money acquired from illegitimate gains. While regulators across the globe continue to implement Anti Money Laundering laws, corporate entities are faced with compliance obligations. A robust mechanism for AML compliance to verify and monitor business associates can help enterprises achieve the all-important trust in a B2B relationship.

KYC and AML Compliance can help cryptocurrencies to earn legitimacy

Why Cryptocurrencies need KYC and AML Compliance?

AML Compliance for cryptocurrencies

Recommended For You:

AML & KYC Compliance: 5 Ways AI is Supporting the Fight Against Financial Crimes

Global Efforts – Crackdown of Shell Companies

Corporate Transparency Act (CTA) – USA

Person with Significant Control (PSC) – UK

Combat Shell Companies with…

Business Verification

Risk-based AML Program

What Should the Program Include?

Red Flags

Watch list Screening

Ongoing Transaction Monitoring

Address Verification

To Sum It Up …

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

Sweden

Cyprus

United Kingdom

Dubai

KYC and AML Compliance can help cryptocurrencies to earn legitimacy

Why Cryptocurrencies need KYC and AML Compliance?

AML Compliance for cryptocurrencies

Recommended For You:

AML & KYC Compliance: 5 Ways AI is Supporting the Fight Against Financial Crimes

How do Shell Companies Launder Money?

Global Efforts – Crackdown of Shell Companies

Corporate Transparency Act (CTA) – USA

Person with Significant Control (PSC) – UK

Combat Shell Companies with…

Business Verification

Risk-based AML Program

What Should the Program Include?

Red Flags

Watch list Screening

Ongoing Transaction Monitoring

Address Verification

To Sum It Up …

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.