Due to some factors, there are inconsistent levels of compliance with KYC processes in the cryptocurrency industry. Traceto.io KYC framework intends to provide a solution to the compliance issues that plague the world of cryptocurrencies.
The meteoric rise of cryptocurrencies and its pitfalls
Since 2017, cryptocurrencies have continually experienced market-breaking boosts that have made them a bane in the existence of financial institutions and regulators. Due to their pseudo-anonymous nature, there is a heightened potential risk level of illegal activities funding associated. This has not escaped the notice of regulators and financial institutions. All are scrambling to put in place measures to avoid AML (anti-money laundering) and CTF (counter-terrorism funding) violations.
Several crypto companies do not comply with the Know-Your-Customer (KYC) procedures that are put in place. The inconsistency in the adoption of these KYC processes that is demonstrated by crypto companies stems from several factors such as their misconceived belief that the anonymous nature of crypto overrides all, lack of experienced personnel to build secure KYC processes and a lack of priority for AML and CTF measures.
The truth is that it is not only the businesses and companies of cryptocurrency that find themselves faced with compliance challenges, the regulatory bodies are also unable to keep up with the leaps in technology being used to enhance illicit activities.
What exactly is KYC?
KYC stands for Know Your Customer or Know Your Client. It refers to a set of processes through which a business can identify and verify the identity of a client. The aim is to prevent financial institutions from being used by criminals either intentionally or unintentionally for money laundering related activities or terrorism financing. Other similar procedures like checks for creditworthiness and product suitability controls enable businesses and financial institutions to understand their client financial handlings fully.
Any business should not ignore these KYC processes whatsoever because they serve as proof to regulators that the risks of money laundering, terrorism financing, creditworthiness and the likes have been adequately assessed before embarking on a business relationship with a client. Failure to adopt these processes results in the violation of regulatory measures associated with AML and CTF, and this has caused money loss for financial institutions.
Where does Traceto.IO come in?
Trateco.io is an affiliate of Cynopsis Solutions Pte. Ltd., a Singapore based Regtech company. Its operation revolves around helping clients with KYC associated procedures and financial regulatory requirements such as AML and CTF. Experience is said to be the best teacher and Traceto.io has it in spades, Financial and Blockchain sectors.
The continual evolution of digital currencies, its nature and lack of specific regulations for the ‘virtual’ world will continue to stack up compliance challenges.
Traceto.io offers an easy solution to the KYC related problems and challenges that crypto companies and regulators face through the Trateco KYC Framework and Trateco Network. Initially, the network would be focused on resolving AML and CTF related issues, but it would eventually evolve to address problems related to Credit Worthiness and Product Suitability.
Controls for Product Suitability will be responsible for preventing sales of financial products to any customer whose credit profile is not suited to the product.
Checks for Credit Worthiness are to be used to avoid lines of credit to be offered to clients who are not likely to meet the payment.
How does the framework operate?
The several processes involved for a business to know its clients has been explicitly clarified in this framework. It has been processed into four basic questions:
- Who are you?: This involves identifying, determining and verifying the identity of a client through government-issued credentials like passports, identity cards, and drivers’ license.
- Who are you not?: This is part of the screening process, and it serves to expose customers who have a potential for high risk before they come on board as a client.
- Are you still who you say you are?: This is a process that involves the continuation of the screening process over time.
- What did you do?: Through this process, the business can know the source of their clients’ funds and investigate their transactions for suspicious criminal activities.
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