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How KYC for ICOs can Make Cryptocurrency Great Again?

Ashley Williams
June 21, 2019
3 minutes read
2458

Give people a mode of money transaction free from banks. That was the thought behind cryptocurrency. And blockchain technology – that powers the majority of cryptocurrencies – was the perfect tool to achieve that.

But things have not gone as planned. Mention Bitcoin in a gathering and you will surely hear voices of fake KYC Of ICOs and Ponzi schemes.

Start 15 Days Free Trial of Shufti Pro KYC Services Now!

What went wrong with Cryptocurrency?

The deregulated nature of Bitcoin worked well in attracting money. But it created another problem. When something is not regulated people exploit it. Scammers and double-dealers started jumping on the bandwagon of ICOs with the intention of fooling people into giving their fiat currency.

On the flip side, those that were looking to park their illegal money hit the jackpot. ICOs that genuinely wanted to create value in the world through their coins got the short end of the stick.

The financial regulation bodies started cracking down on kyc ICOs and exchanges. ICO’s could not take investors onboard without taking the risk.

According to a statement by the securities and exchange commission;

“A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation”

So, what’s the solution?

A tried and tested solution is Know Your Customer or KYC compliance.

What is KYC ?

KYC stands for know your customer, it is a process that lets companies know their customers. It includes the verification process that prevents fraudulent individuals from abusing their services. Banks have been successfully using KYC services for years.

Different financial regulatory authorities have made it mandatory for banks to comply with KYC verification to make sure that the person they are dealing with is not a fraud.

Banks check and verify personal information through several means including document verification. They also readily appropriate credible third-party identity verification services or KYC service providers.

Documents such as government-issued ID cards and driver’s licenses help smoothe the process of investing.

What is AML?

AML – the anti-money laundering act – prevents people from laundering money. ICOs can put this in place as well to ensure that the people buying their tokens are not on any black or greylist.

KYC and AML regulations put a barrier to entry by checking the identity documents. FINRA Rule 3310 governs the AML compliance of companies.

Advantages of Implementing KYC for ICOs

Deters scammers from engaging in ICOs
Fights money laundering
Protects investors’ assets
Fewer legal, tax and credibility issues
A healthy relationship with banks

Funds raised by ICO or token sales can attract black money. But KYC and AML compliance can restore people’s faith in the blockchain based economy. Cryptocurrency exchanges can also put these compliance measures to ensure that the ICOs are genuine. Then the token economy will truly benefit the population at large.

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
Banks Introduce Confirmation of Payee to Tackle Fraud
What went wrong with Cryptocurrency?
So, what’s the solution?
What is KYC ?
What is AML?
Advantages of Implementing KYC for ICOs
The Confirmation of Payee (CoP) system was launched in October 2018 but implementation was delayed multiple times. Now under Payment Systems Regulator rules the six key banking groups—Barclays, RBS, Lloyds, HSBC, Nationwide, and Santander and their subsidiary banks—have a deadline of 30th June to execute the system for Faster Payments and Chaps.
Banks Introduce Confirmation of Payee to Tackle #Fraud https://t.co/gwPKZvpOcb #payments #FasterPayments #CHAPS #BACS #banking #CoP pic.twitter.com/fA8vLiaddQ
— Neira Jones (@neirajones) June 4, 2020
Some banks have already introduced it, so if both your bank and your intended recipient are now taking part, you might be inclined to check who is taking your money. If you can identify a mismatch, the payment can be stopped.
In the past, bank transfers would be complete in spite of the name written and the fact that it matched the account and sort code. This allowed scammers to pose as someone else—often authentic people and companies—and fool people into sending money to the wrong account. Customers could also transfer funds to the wrong account by mistyping the account number by mistake.
Bank of Scotland, Halifax, Lloyds, NatWest, RBS, and Ulster Bank are some of the banks that have already introduced the system to facilitate Faster Payments for both individuals and companies. Faster Payments are the most common type of bank transfer, taking under two hours and for sums up to £10,000. By the end of June, banks from the six main groups will also introduce confirmation for Chaps payments, used for huge sums of money.
After 30 June, banks will be launching the system for Bacs payments, which are mostly adopted for direct payments or by companies to pay salaries. However, the system most likely won’t apply to international payments any time soon.
The Confirmation of Payee system is directed to impede one type of bank transfer scams, namely authorized push payment fraud. According to UK Finance, Britishers lost a staggering amount of £465 million to these scams in 2019. Thit includes unknowingly transferring funds into accounts exploited by criminals or paying for goods and services that were never received.
Last month the Lending Standards Board (LSB) warned that banks aren’t doing enough to protect and compensate victims of this type of fraud, especially their vulnerable customers.

Recent Posts

Blog
CFT & AML Compliance To Hold Back Financial Crimes
What went wrong with Cryptocurrency?
So, what’s the solution?
What is KYC ?
What is AML?
Advantages of Implementing KYC for ICOs
In this digital era, many factors are greasing the wheel of money laundering. Due to online transactions, it has become a piece of cake for fraudsters to carry out their financial frauds. But the AML Compliance Program for business is to govern the monitoring of accounts, detection, and reporting of financial crimes to relevant authorities. CFT and AML compliance promote stability in financial markets by mitigating the adverse effects of criminal economic activities and promote stability in financial markets.

In this digital era, many factors are greasing the wheel of money laundering. Due to online transactions, it has become a piece of cake for fraudsters to carry out their financial frauds. But the AML Compliance Program for business is to govern the monitoring of accounts, detection, and reporting of financial crimes to relevant authorities. CFT and AML compliance promote stability in financial markets by mitigating the adverse effects of criminal economic activities and promote stability in financial markets.
AML compliance trace and tackle the frauds like money laundering that any financial institute can face. Customer screening against certain PEP lists and sanction lists is done to complete due diligence and deter money laundering, terrorist funding, drug trafficking and other financial frauds. Anti money laundering checks provide a backbone for CFT (combating the financing of terrorism) and KYC regulations. AML regulations are key components of the US Patriot Act, 2001. In 2005 the Reserve Bank of India made it compulsory for banks across the globe to adhere to AML compliance to detect and prevent the financing of illegal activities.
Financial Regulations for Money Laundering- A Deep Dive:
The Financial Action Task Force, which is a group of 35 countries, work together to curb the risk of financing of terrorism by standardizing regulations to prevent such frauds. These authorities are working to keep a close check on money laundering activities. Many countries are following the guidelines of FATF to impede financial crimes and to restrict terrorist financing and money laundering. There are 40 recommendations of the FATF to put a halt on money laundering which countries follow. The FATF Recommendations are recognized by the global AML and CFT standards. The list of data sets of citizens that is being continuously updated is provided to law enforcement agencies in case any illegal activity is performed by any individual.
What is Combating the Financing of Terrorism?
CFT which is also called Counterfinancing of Terrorism is the process that involves investigation and analysis of sources that are used in the funding of various activities to gain political, religious, or ideological goals. By continuously monitoring transactions and by tracking down the source of the funds that support terrorist activities such activities can be prevented from occurring.
Key Features of CFT:
CFT is achieved by having a proper channel for AML checks. Following are some key features of how CFT works:
CFT is basically restricting the movement of funding of terrorist organizations. By focusing on a variety of entities, including banks, charities, and businesses by regulation, supervision, and reporting.
The efforts which are made to authenticate and put a halt on the movement of money and to monitor transactions to screen out those which are used to fund terrorist activities come under the umbrella of CFT.
The CFT process plays a significant role in identifying money laundering activities from detection to prosecution. Money laundering appears to be legitimate but processes like CFT are used to identify such criminal activities and eradicate them.
Financial Intelligence Units investigate suspicious transactions and information is provided to law enforcement for further investigation or prosecution.
How Combating the Financing of Terrorism Works?
CFT involves guiding and teaching financial investigative techniques and training financial institutes to identify suspicious activities. CFT efforts may examine entities including charities, registered money service businesses, underground banking entities with many others. Money launderers need to conceal the origin and how the money will be used in order to carry out their activities. Such frauds come from legal sources such as legitimate organizations as well as from illegal sources such as drug trafficking and government corruption. Terrorism financing and money laundering, both are interconnected. When an entity is able to detect money laundering activities, it is preventing terrorist funding simultaneously so combating money laundering is a key to CFT.
AML Compliance for Businesses
AML (Anti Money Laundering) practices are used to perform due diligence of customers. Businesses, especially financial institutes need to abide by AML checks to deny the loss of millions in penalties that will be imposed by regulatory authorities for not complying with the regulations. To analyze customer data and to detect suspicious activities financial institutes deploy stringent AML checks. Such checks filter out customer data and classify it accordingto the suspicion level so that high risk customers can be highlighted. Any sudden and abrupt increase in money transfer or large withdrawal should be considered suspicious and businesses should act accordingly. AML checks help financial institutes to impede financial frauds. AML screening detects not only money laundering but also other financial frauds like tax evasion, terrorist financing can also be traced and eradicated.
PEP List Screening- An Integral Part of AML & CFT:
A politically exposed person or PEP is the one who has a high profile role in society. Due to this prominent position that they hold in society they can commit money laundering and other offences. Many case studies and analysis reports have confirmed this fact already. There is a list available that holds all the names of PEPs known as the PEP list. Screening individuals against this list is an integral part of AML and CFT to identify the person. As these people are more likely to be involved in financial crimes so they come under the umbrella of high-risk for financial sectors. With PEP status additional risks which are involved can be highlighted. Businesses need to be more vigilant and must apply additional AML and CFT measures when dealing with such persons. In order to avoid reputational and regulatory damages, PEP list screening is an integral part of AML and CFT regulations.
Read More: Politically Exposed Person – An unsaid threat to Businesses
So in a nutshell, AML and CFT compliance are to eradicate financial crimes. Businesses need to abide by these regulations in order to be safe. If a business fails to comply with these regulations it will end up falling in the pit of money launderers and end up paying a hefty amount of fine which will be imposed by regulatory authorities. So in order to curb financial crimes and meet identity verification requirements businesses should have proper AML checks into their systems.

How KYC for ICOs can Make Cryptocurrency Great Again?

Start 15 Days Free Trial of Shufti Pro KYC Services Now!

What went wrong with Cryptocurrency?

“A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation”

So, what’s the solution?

What is KYC ?

What is AML?

Advantages of Implementing KYC for ICOs

Financial Regulations for Money Laundering- A Deep Dive:

Key Features of CFT:

How Combating the Financing of Terrorism Works?

AML Compliance for Businesses

PEP List Screening- An Integral Part of AML & CFT:

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

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How KYC for ICOs can Make Cryptocurrency Great Again?

Start 15 Days Free Trial of Shufti Pro KYC Services Now!

What went wrong with Cryptocurrency?

So, what’s the solution?

What is KYC ?

What is AML?

Advantages of Implementing KYC for ICOs

Financial Regulations for Money Laundering- A Deep Dive:

What is Combating the Financing of Terrorism?

Key Features of CFT:

How Combating the Financing of Terrorism Works?

AML Compliance for Businesses

PEP List Screening- An Integral Part of AML & CFT:

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.