The crypto landscape is notorious for its degree of freedom and anonymity. Numerous users are attracted to digital payment methods to avoid unnecessary central authorities and needless third-party intervention. However, too much anonymity and freedom can lead to an increase in illegal activities.
Malicious individuals will always use the available channels to conduct harmful practices, including money laundering, white-collar crime or serious scams that involve human trafficking. Crypto companies should implement KYC and AML procedures to prevent such undesirable outcomes. Today, we will discuss the nature of KYC protocols, where to acquire robust KYC solutions and which KYC providers are the most reliable.
- KYC solutions have become a big part of running a crypto company, allowing business owners to prevent fraud and white-collar crime.
- KYC/AML guidelines require the retrieval of client information and verifying their legitimacy through various channels.
- The current KYC solutions market is booming in the crypto field, with many reliable providers offering cutting-edge fraud detection and prevention services.
Understanding the Know-Your-Customer Concept
Know-your-customer (KYC) procedures are often mandatory parts of the broader anti-money laundering guidelines. The KYC processes ensure that companies know their customers well and can vouch for their legitimacy. As a result, companies can be sure that their clients are not endangering the organisation’s stakeholders inside and outside of the business.
While the KYC and AML guidelines are not mandatory in every country or market, their international presence is growing every year.
For example, most financial institutions must verify customer data per the KYC guidelines of their relevant jurisdictions. Other industries are also joining the financial companies to increase their defence against malicious entities and money laundering threats.
Identity Verification Process in KYC Solutions
KYC software consists of several important components. The most important are identity verification services that validate the customer profiles. The identity of customers can be verified in several ways, including simple ID document verification, address checks and even biometric authentication.
The extent of identity verification depends on the relevant regional laws and the company’s decision. If there are no required KYC guidelines in your country, there are no objective answers to which verification checks you should implement. It all depends on the company structure, the number of customers, and other important factors.
Types of Identity Verification Services
As discussed above, the most basic forms of identity verification are ID checks. But there is a wide selection of additional verification methods, including live face authentication, phone checks, static selfie verification, email verification and database matching. The degree of difficulty and convenience varies with these methods, and it is up to the companies to decide which type best suits their needs.
Many companies also combine different verification methods for their KYC technology to create a single, foolproof validation method. Regulatory compliance guidelines sometimes require more than one verification method to ensure that customers are evaluated thoroughly.
AML Monitoring and Checklists
While not strictly a part of the KYC guideline steps, the anti-money laundering (AML) regulations are also critical for organisations that seek fraud prevention. AML practices go hand-in-hand with KYC, allowing companies to check the validity of financial transactions swiftly. In many cases, white-collar crime and money laundering are conducted by verified customers.
At first, they earn the trust of companies by submitting legitimate information and conducting lawful transactions. Once the KYC protocols are satisfied, the malicious parties execute fraudulent transactions.
AML practices prevent this from happening through extensive transaction checks. Each transaction deviation from the norm must go through AML evaluations. This way, malicious parties cannot sneak in money laundering attempts or other fraudulent activities.
What are KYC Rules for Crypto Wallets
Naturally, the KYC for crypto wallets is more relaxed and less intrusive to not limit the freedom of cryptocurrency transactions. However, after many cases of fraud, white-collar crime and other illegal activities, crypto wallet providers have started to partner with crypto KYC providers.
In most cases, crypto wallets require a simple identification check to match the provided ID with the wallet account information. This is a minimum requirement for the KYC guidelines, and most wallets have already implemented this basic verification.
Is KYC for Crypto Exchanges Any Different?
Crypto exchanges employ similar KYC procedures but are required to retrieve slightly more customer information. Typically, they must obtain a legal name, official address, birthdate and an ID verification number from each customer. After that, crypto exchanges must run several checks to verify the existence and legitimacy of each customer.
While this protocol goes against the complete anonymity and decentralisation of Blockchain methodology, it is a necessary precaution to prevent numerous money laundering attempts and other white-collar crimes.
Top KYC/AML Providers You Should Consider in 2024
The emergence of crypto-related fraud has received an appropriate answer from the market, with numerous top KYC providers entering the crypto niche. In 2024, several companies have established themselves as reputable and reliable in this niche. Let’s discuss some of the most popular choices in the current landscape.
SolidProof is a go-to KYC provider for modern crypto projects and companies, delivering a seamless KYC service that doesn’t disrupt the normal company workflow. SolidProof has a diverse selection of identity verification options, from simple ID checks to complex biometric scans.
However, SolidProof does not provide reactive services to clients. Instead, this company aims to identify vulnerabilities within your current client verification process and give you guidelines on how to fix them. SolidProof is developing a prototype software that automates the search for potential weaknesses in the client’s business processes.
Coming in as a close second choice for an industry-leading KYC solution is identity.com. This project aims to combine the best of both worlds and merge the KYC protocols into a decentralised blockchain environment.
As a result, users can go through a verification process on-chain and without any centralised permissions. So, the entire authentication will be conducted swiftly and without endangering sensitive customer information. Identity.com is an open-source project that can be integrated into most existing blockchain networks.
Chainanalysis is an established name in the blockchain industry, starting off as a blockchain data platform. Today, Chainanalysis offers a comprehensive package of cybersecurity, KYC and AML solutions for crypto projects. Their robust security solutions are great for just about any crypto company since they ensure full-stop protection against most crypto threats.
Chainanalysis helps clients investigate questionable transactions and users. They are also adept at incident response and recovery of lost crypto funds. Finally, Chainanalysis offers a comprehensive training course for all crypto professionals to deepen their knowledge about crypto security and crime prevention.
Chainanalysis is an excellent choice for emerging crypto startups to hit the ground running and implement the best-possible KYC/AML practices for their unique needs.
The KYC providers market has increased significantly in the crypto field. Today, there are a lot of excellent choices in this niche and crypto companies can enjoy state-of-the-art crypto security tools at their disposal. In 2024, it no longer makes sense to neglect the KYC and AML guidelines, as they could save your company from significant financial crimes or fraud. So, if you wish to implement KYC procedures, now might be the best time!