What is the KYC procedure and why is it getting so much attention? We tell you how she can protect you from scammers while maintaining anonymity. KYC and AML checks: why do you need identity verification in the crypto-currency field. KYC (Know Your Customer) is a procedure for verifying the identity of a client and assessing potential risks from him. But why is it needed and why is it almost impossible to buy cryptocurrency today without verifying your identity? Does this not contradict the original principles of anonymity and decentralization of the crypto industry? Today we will analyze what AML and KYC checks are for and how they work. We will also tell you how verification will help reduce the number of fraudsters while maintaining basic user anonymity.
Anti-Money Laundering is a set of measures to counter money laundering, terrorist financing and the creation of weapons of mass destruction. This procedure includes the identification, storage and mutual exchange of information about customers, their profits and transactions between financial institutions and government departments. Most classical financial institutions use AML measures to check a business that works with cash or uses cash as one of the main assets. They also check those enterprises that have money in different accounts, regularly transfer them to other countries and banks, buy futures and other instruments for cash settlement. In other words, all businesses that can potentially bypass financial monitoring and launder funds fall under verification.
Total risk (in percent) - the probability that the address is associated with illegal activity. Sources of risk - known types of services with which the address interacted, and the percentage of funds received from / given to these services, for which the total risk is calculated.
If the service does not conduct such checks, then fraudsters can use it as a platform for money laundering and terrorist financing. And then the service itself will be held accountable. That is why exchanges and other large cryptocurrency companies implement AML requirements in their business and conduct regular KYC verifications.
- 0-25% is a clean wallet/transaction;
- 25-75% is the average level of risk;
- 75%+ - such a wallet/transaction is considered risky
The risk is more than 50%, but I am sure that the address is reliable. How to be? The results of the check are based on international databases, which are constantly updated. Therefore, an address that had 0% risk yesterday could receive or give an asset to a risky counterparty today. In this case, the risk assessment will change.