A Guide to Choosing the Right KYC Provider for your ICO / Token Sale

Token sales have come under heavy scrutiny over the last several years as a result of bad actors taking advantage of the revolutionary approach to raising funds. With regulators taking an increasingly strict AML approach to how projects vet their investors, it’s critical for ICO issuers to carry out robust and efficient KYC on their participants. In this quick guide, we take a look at some of the key qualities to seek out in a KYC provider.

KYC (Know Your Customer) is a crucial process that businesses must implement in order to comply with regulations and protect themselves from fraud. With the rise of digitalization, KYC procedures have become even more important as they help prevent financial crimes such as money laundering, identity theft, and terrorist financing. 

When it comes to the crypto space, the anonymity that is made possible through the revolutionary technology that is blockchain means that robust and effective KYC procedures are even more critical. National regulators around the world — taking their cue from global anti-money laundering (AML) watchdog the Financial Action Task Force (FATF) — have been modifying their legal codes to include explicit and detailed KYC/AML regulations for crypto businesses. 

At the same time, the crypto industry’s foundations are grounded in ideas of privacy. Yet respecting privacy and ensuring that crypto platforms and services are not exploited by financial criminals are not mutually exclusive — by using robust and efficient KYC/AML processes, crypto platforms and issuers can ensure the privacy of their users while ensuring their platform and project is secure and compliant. 

With these points in mind, choosing the right KYC provider for your upcoming ICO or token sale is a critical decision that requires careful consideration. Here are some key factors to keep in mind when making your choice.

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Compliance with Global Regulations

The first and most important factor to consider when choosing a KYC provider is what kind of regulations they offer compliance for — and how specialized they are in the legal intricacies of each jurisdiction they cover. 

While many are similar, each country has its own set of regulations for customer due diligence (CDD) and KYC/AML, so it’s essential to choose a provider that has experience in your target market. 

Make sure that the provider follows the regulations set by the appropriate regulatory bodies, such as the FATF, FCA, FinCEN, and others. We discuss global regulators and their regimes in further detail in our Regulatory Focus series

As most token sales and ICOs are global in scope, token issuers typically want to choose a KYC provider that offers relatively broad and comprehensive cover for a wide range of global regulations. Other, more localized projects may only want or need to open access to the ICO to individuals in a given country or region. 

Security & Data Privacy

Since KYC involves handling sensitive personal information, security is paramount. Your chosen provider should have robust security measures in place to protect both your customers’ data and your business from potential cyber threats. 

Look for providers that offer multi-factor authentication, data encryption, and regular security audits to ensure the highest level of protection. Ensuring that your KYC provider takes data security and privacy seriously is of paramount importance if you are going to build a loyal user base and ensure the long-term viability of your project. 

User-Friendly Interface

A user-friendly interface that places Customer Experience at its center is crucial for a smooth KYC process. Your customers should be able to easily navigate through the verification steps without any confusion or frustration, and to understand the reasoning for each step they need to pass through. 

A complicated or lengthy process may lead to customers abandoning the onboarding process, resulting in lost business opportunities. In order to ensure the success of your ICO/token sale, you will need a KYC provider that offers a simple and intuitive interface for a seamless customer experience — which ideally can be easily integrated into your own API and customized in line with your branding. 

Range of Verification Methods

Different businesses have different verification needs, so it’s essential to choose a KYC provider that offers a wide range of verification methods. Some common methods include ID document verification, facial recognition, and biometric verification. More advanced onboarding platforms also include Liveness checks and Enhanced Due Diligence offerings that are able to cross check identified users for adverse media references and other risk indicators.

Your provider should also offer customizable solutions to fit your specific business needs and the level of risk associated with your industry.

Scalability

As your business grows, so will your KYC requirements. It’s crucial to choose a provider that can scale with your business and accommodate increased demand for verification services without compromising on quality or security. Make sure to inquire about the provider’s ability to handle large volumes of verifications and their track record in maintaining high accuracy and customer satisfaction.

Reputation and Customer Support

Before finalizing your decision, research the reputation of the KYC provider. Look for reviews from other businesses that have used their services, and make sure to check their customer support availability and response time. It’s essential to choose a provider that not only meets your technical requirements but also has a track record of providing excellent customer support.

Cost

While cost should not be the determining factor, it’s still an important consideration. KYC providers typically charge per verification, so make sure to compare prices and choose a provider that offers competitive rates without compromising on quality or security. 

Keep in mind that investing in a reliable KYC provider can save your business from potential fines and reputational damage in the long run, so opting for whatever is the cheapest solution is not usually the most efficient approach to selecting your provider. 

Choosing the right KYC Solution

Different KYC / AML providers offer a wide range of capabilities and features. In summary, when choosing a KYC provider for your ICO or token sale, a good place to start is to look for the following qualities and credentials: 

    • End-to-end solution — Your KYC provider should cover all aspects of a secure and compliant onboarding system, from KYC to EDD, AML and anti-fraud. 
    • Jurisdictional cover — The KYC provider should have the capabilities to support global ID documents and verify / onboard users on a global scale. 
    • Customer Experience — Ask for a step-by-step demo of your KYC providers onboarding journey and get them to explain how the configuration and design of the system has been informed by customer experience. A professional provider will have a clear and considered strategy for optimizing the journey for users, and minimizing abandonment rates. 
  • Security and privacy Ensuring that your KYC provider has advanced and robust data privacy and security protocols and measures in place is critical — from a legal, reputational and marketing standpoint. Ask your potential KYC provider what measures they have in place to ensure compliance with data privacy laws such as the EU’s GDPR and other local regimes in areas where you want to access clients or investors. In the crypto space, ensuring data privacy — while adhering to regulations — is especially critical, given the sensitivity of many crypto users to this issue.  
  • Integration — A KYC solution needs to not only work for your users or clients, but needs to also be simple to use for your own team. Ask your provider about the level of support they offer for integration and maintenance of the platform, and how seamlessly the platform can be integrated with your API. Check reviews to understand what their after-sales service is like so that you avoid unnecessary headaches in the future.

Conclusion

Selecting the right KYC provider for your business is a crucial decision that should not be taken lightly. Ensure that the provider meets all regulatory requirements, has robust security measures, offers a user-friendly interface and a wide range of verification methods, can scale with your business, and has a good reputation with excellent customer support. 

With the right provider, you can streamline your KYC process and protect your ICO from being exploited by financial criminals that can bring down your entire project.

Looking for a KYC provider for your next token sale or ICO? Get in touch and we’ll be happy to tell you more about KYC-Chain’s solutions.