Know Your Customer and Anti-Money-Laundering procedures are the two procedures required now when conducting business related to cryptocurrencies.
Everyone is talking about them, but how they really work?
KYC is a procedure to identify who is really registering into the platform to prevent identity theft and other eventual form of coercion.
In the KYC are usually requested, data from the registering person, pictures of documents and a picture taken in real time to understand that the person is really registering with that data.
Let’s say that the A-man want to steal my identity and registering into a strange business scheme. If he is a friend of mine, he may have got access to my data and even documents. I the live recognition was not requested, A-man could eventually subscribe myself to wherever he wants.
That is why my first two advices are:
- do not avoid KYC, because is a form to preserve your data and your business identity
- choose more accurately your friends, since Ponzi schemes and other “non-favorable-businesses” are often suggested from our closest friends. Or eventually, friends we did not even remember to have
KYC requires a valid document, picture of you holding your document and sometimes even you will be requested for pictures of you holding a paper hand written carrying the actual date.
But, besides these data, what does the KYC provider aim to get?
Well, at first, it usually recognizes the IP where you are logging in. If you are, let’s say, in Cambodia, while you are registering a USA account, further verifications may be requested.
Another information that will be cross-checked is the location of your Bank Account. If your IP is saying “Cambodia”, your bank account is located at Gibraltar and you are registering a USA account, I think that you are not going to allowed to proceed with the registration to the business.
We are already facing two levels of protection: protection of yourself and protection of the business owner where you want to be onboarded.
And what about the crypto transaction?
Whell, KYC becomes KYT, Know Your Transactions. The KYT is like a tree of transactions, where the KYC programme identifies all the transactions made from the wallet you are sending the cryptocurrencies from. It checks all the wallets that your address interacted and cross-checks them with a database of fraudulent and suspicious addresses. If the wallet got in touch with strange addresses, then your account will be flagged as not completely accountable.
Once all these parameters have been calculated, your profile will be associated with a risk score and the business owner, accordingly with the KYC/AML provider, will set the thresholds for riskful accounts and accountable accounts.
Have you ever been rejected from a KYC check? Could you find the potential reason in this post?
