KYC Crypto – Ways To Make Crypto Businesses Protected

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KYC

Cryptocurrency is trending nowadays and getting a lot of attention. Due to the absence of KYC Crypto compliance frauds are increasing and must be put to an end before getting worse.


For the past few years the technology is continuously evolving, thus digitalization has opened great opportunities for the business. Among them, the cryptocurrency business has emerged as digital money and is getting popular day by day. As the usage of digital currency is spreading worldwide, crypto investors and businesses have to face an increasing number of frauds.

The crypto business is obliged to strengthen  KYC compliance to save their businesses from such frauds. Moreover, in situations like customer data breaches, they have to pay hefty fines. Nowadays  KYC is becoming common in the crypto market to cope with the regulation which tends to prevent fraud.

Importance of KYC in Cryptocurrency space

Crypto businesses being a rapidly growing industry have got the attention of billions of customers. With the spike in the rates of cryptocurrency, the traffic on online crypto markets has increased and new customers tend to sign in. Thus, know your customer in the crypto business is of great importance. KYC ensures the onboarding of legitimate investors.

KYC Crypto refers to

  • Identity verification of the investors/buyers to linkup them to the digital wallets
  • To get better knowledge regarding the potential investor and to keep an eye on their activities
  • Deters the probability of frauds like money laundering, etc

How Do Money Launderers Use Cryptocurrency To Do Frauds?

There are multiple loopholes in the crypto businesses due to the lack of crypto laws. Fraudsters usually take advantage of such vulnerabilities to manipulate the system. The exploitation of crypto space is mostly done by the money launderers, they use their illegitimate earned money to invest in the crypto market to launder money.

●    Money placements

The money launderers change the cash earned through illegal ways into digital currency.

●    Money layering

Digital currency is hard to trace and determining its source is quite challenging. Thus the money launderers layer the illegal crypto coins into legitimate coins or simply by using cryptocurrency mixing services they mix up the legal and illegal coins to commit fraud

●    Integrating money

The money launders tend to change back the digital currency back to cash money to acquire services or to invest in illegal activities

KYC Obligatory For Crypto Exchanges

Throughout the world, there are not yet a set of particular laws and regulations. Cryptocurrency is not legalized in multiple states so buying or selling digital is stated illegal. Due to this reason, fraudsters are doing fraud easily. To let them down KYC is important and many crypto exchanges are obliged to add KYC compliance which will help them to verify the true identities of the investor before boarding them. KYC money laundering laws also help to identify money launderers and put them behind the bars.

●    Mitigating Use Of Cryptocurrency Illegally

Cryptocurrency is not regulated worldwide. Thus, the source of emerging frauds. Digital currency is being widely used to do illegal activities e.g terrorist financing money laundering, drug trafficking. Therefore, KYC compliance approved by the regulators is mandatory for the crypto exchanges so that they can verify the investors’ identities and keep track of their transactions. Through KYC anti-money laundering screening, the investors involved in crimes are identified by matching their information with the watchlist, sanction, and PEP database.

●     To Reduce Number Of Frauds

The fraudsters are actively involved in the crypto business to commit frauds. KYC CDD AML regulations are used to restrict money launderers to transfer illegitimate money via illegal sources or using money laundering to finance terrorist origination. Moreover, with the help of KYC crypto regulation, the money launderers will be identified and eventually, fraud will be reduced

Possible Solutions To Deter Cryptocurrency Fraud

●    Know Your Customer Verification

KYC verification services are beneficial in multiple ways. In crypto businesses the complete knowledge of the investor is mandatory. To do so KYC is the best way to verify the true identities of the investors and identify the exploit identities which tend to or can be possibly part of any crime in the future

●    Travel Rules Compliance

Regulators have provided the compliance related to travel which is obliged by the crypto dealers to follow to restrict the investor to travel with minimal digital currency to mitigate the increasing number of money laundering cases

●    Monitoring Customer Transaction

For digital currency businesses, it’s mandatory to keep an eye on the investor transaction. So that any irregular or suspicious transaction goes undetected. Thus ongoing monitoring and keeping records is the best way to pull money laundering from society.

Final Thoughts

It’s crystal clear, to fight the war against the money launderers and other fraudsters who tend to exploit the crypto business, AML/KYC compliance is mandatory. These compliances are the best in the market which is efficiently reducing the number of frauds thus must be adopted to protect the real world from frauds.