15 Jun 2021

Crypto Wallet Screening: KYC-Chain’s Automated Compliance Solution

While the crypto space has made giant strides in the last several years, the vulnerability of the industry to exploitation by criminals for money laundering and other illicit activity remains a problem. 

This danger is often cited as one of the main justifications for tighter regulation or even suppression of the space. 

Developing innovative tools for countering the threat - while preserving the clear benefits that crypto provides - is therefore critical to the space’s long term viability and success. 

Wallet Screening

KYC-Chain’s Wallet Screening tool allows crypto companies and exchanges to generate AML/KYC Risk Reports that evaluate the money laundering risk of blockchain addresses and their owners. 

This capability can allow existing and future companies operating within the space to reduce the risk that transactions flowing through their platforms are being used for criminal activity. 

It is also a powerful, simple and automated approach to remaining compliant with fast-evolving global regulations governing Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) - while reducing the need for large compliance teams. 

Reports

Our Wallet Screening tool allows companies that facilitate or work with crypto transactions to generate reports that provide detailed breakdowns of a crypto address’ risk profile. 

This provides companies with a clear and actionable source of information for implementing a risk-based approach to their AML protocols. 

KYC-Chain’ Wallet Screening tool can currently generate reports for addresses on the following blockchains:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Dash (DASH)
  • Bitcoin Cash (BCH)
  • NEO (NEO)
  • Hyperledger and more

The tool works by analyzing transaction patterns using the following data:

  • 270+ risk indicators & profiles
  • 150+ advanced evaluation algorithms, including behavioral analysis and data science techniques
  • A network of compliant members and partners

With worldwide coverage, the tool creates reports that can include an extensive and detailed range of information, depending on whether a standard or enhanced check has been executed.

Information generated by reports includes the following key elements and presentations in an easy-to understand User Interface:

Address Summary

This component presents a broad breakdown of a crypto wallet’s general characteristics, including: 

  • Address, and which respective blockchain it exists on (Bitcoin or Ethereum)
  • Address Description: can include notes of any known hack or ransomware affecting the wallet, information on the entity that owns it, and the industry the entity operates in (if available)
  • Multisig status
  • If it belongs to an owner with multiple addresses
  • Current balance expressed in cryptocurrency
  • Current USD value of held tokens
  • Token types (for ETH addresses)
  • Entity name of the owner of the address
  • Information about the type of entity that owns the address, and whether any characteristics have been identified from the risk indicators (detailed below)
  • Risk Score: ranging between 0-99 to indicate risk levels
  • Network Membership: if the owner is an AMLT Trusted Party Network Member

Now let’s take a deeper look at the more detailed report insights:

Wallet Risk Score Analysis

Our Wallet Risk Score analysis uses a wallet address to run several checks that include profile analysis, financial in/outs, and risk indicators.

Examples of risk indicators include:

  • Address with a significant part of incoming transactions in close proximity to addresses related to the drugs trade.
  • Address with part of incoming transactions in close proximity to addresses found on the deep/dark web.
  • Address with part of outgoing transactions in close proximity to obliged service with limited KYC processes.

KYC-Chain’s Wallet Screening includes a detailed Risk Score visualization that evaluates a wallet’s risk level according to up to six groups of risk indicators most applicable to the wallet. 

If there are more than six risk indicators, they are categorized as “other”. Each risk factor is assigned a percentage value, indicating the proportional impact it has on the wallet’s Risk Score. 

This allows you to have a quick and easy-to understand view of the types of risks associated with an evaluated wallet, and expedites decision-making on whether a given wallet requires enhanced due diligence (EDD). 

Profile Analysis

KYC-Chain’s Wallet Screening tool also provides a detailed profile analysis within the reports, allowing your team to have a clear picture of the wallets using your crypto services. 

This analysis includes information such as: 

  • Owner’s legal name - In case of institutional entities, the legal name of the owner of the address, for example Payward Inc.
  • Parent and sister companies - If the owner has related companies such as mother or sister companies, it is marked in this section.
  • Geographical risk - Risk of the country in which the owner is registered and/or operates (in case of multiple countries of registration, the risk of the highest risk country is reflected).
  • ICO - Information about the Initial Coin Offerings (various types of crypto asset offerings) to which the address contributed funds and the total value of contributions to individual ICOs, expressed in USD at the exchange rate at the time the contributions took place.
  • Multisig - Provides the addresses that are required to sign a valid multisig transaction from the evaluated address (co-signers).
  • Cluster - Presents how many other addresses were identified as belonging to the same owner.
  • Industry - If the owner of the address is identified as being related to a cryptocurrency or financial industry, the risk of the industry will be displayed here.

Token Analysis (For ETH Reports)

Our Wallet Screening tool also provides a token analysis option for reports on ETH addresses.

This analysis includes:

  • List of Tokens – For each token held on the evaluated address: token name, amount, a value expressed in USD at the current exchange rate, and the current exchange rate. The list is presented in pagination mode. 
  • Distribution of token value pie chart – A diagram presenting the values of tokens currently held on the evaluated address in percentages (in USD at the current exchange rate).
  • Token volume chart – A chart presenting the amount of the selected token held on the evaluated address, over time.
  • Token total balance chart – A chart presenting the balance of all tokens held on the evaluated address over time, expressed in USD at the exchange rates for each point of time presented.

Financial Analysis

Our reports also include a detailed financial analysis of each evaluated address. This allows you to have a clear view of the financial history, activity and status of wallets on your network, including:

  • Financial Summary – Cash flow statistics on the evaluated address since the first transaction and until the Report generation time (the values exclude the value of tokens).
  • Total Transactions – Count of incoming plus outgoing transactions on the evaluated address.
  • Turnover – The sum of incoming plus outgoing transactions’ values on the evaluated address, expressed in cryptocurrency and in USD at the current exchange rate.
  • Total Input – The sum of incoming transactions’ values on the evaluated address, expressed in cryptocurrency and in USD at the current exchange rate.
  • Total Output – The sum of outgoing transactions’ values on the evaluated address, expressed in cryptocurrency and in USD at the current exchange rate.
  • Avg Input – Average value of incoming transactions on the evaluated address, expressed in cryptocurrency and in USD at the current exchange rate.
  • Avg Output – Average value of outgoing transactions on the evaluated address, expressed in cryptocurrency and in USD at the current exchange rate.
  • Largest – Highest value incoming/outgoing transactions on the evaluated address, expressed in cryptocurrency and in USD at the current exchange rate.
  • Smallest – Lowest value incoming/outgoing transactions on the evaluated address, expressed in cryptocurrency and in USD at the current exchange rate.
  • Input Count – count of incoming transactions on the evaluated address.
  • Output Count – count of outgoing transactions on the evaluated address.
  • Incoming and Outgoing Transaction Value Chart - the chart presenting the value of incoming (positive values) and outgoing (negative values) transactions on the evaluated address, expressed in cryptocurrency (excl. value of tokens) as a function of time.
  • Balance History Chart – the chart presenting the balance of cryptocurrency holdings on the evaluated address (excl. balance of tokens) as a function of time.
  • Avg Transaction fee – the average fee set and paid to miners by the owner of the evaluated address, for the transactions outgoing (sent) from the evaluated address
  • Days without transaction – the number of days elapsed since the last incoming or outgoing transaction from the evaluated address until the Report generation time.
  • Maximum number of consecutive incoming transactions – the highest count of transactions subsequently incoming to the evaluated address.
  • Days since start – number of days elapsed since the first transaction occurred on the evaluated address.
  • And many other detailed analytical breakdowns of financial status. 

Other Report Data

As well as the above information, our Wallet Reports also include plenty of other information that is key to understanding the risk profile of a wallet and its associated owner. This includes dark web connections, and other informative flags that can indicate the nature of a wallet and its owner’s activity. 

All this information is available to view within our system and customers can also download a pdf report if needed.

We offer our Wallet Screening tool on a price-per-check basis, as we pay per API call. Interested in finding out how you can put KYC-Chain’s wallet screening technology to use for your crypto business? Get in touch and we’ll be happy to arrange a call and/or a demo.

Any Questions?

Our team is always ready to help you and your business.
Get in touch

Latest Articles

We should have some subheading here, it’s good for SEO as well
Cayman Islands KYC Essentials: KYC-Chain’s Multi Scope
Summary In the fast-evolving landscape of financial regulations, the Cayman Islands remain a pivotal jurisdiction for global investment and financial…
24 Jun 2024
Regulation Focus Series | Article 11: Germany and BaFin
As Europe's largest economy and a major global financial powerhouse, Germany is unsurprisingly a major target for illicit financial activity.…
31 Jan 2024
What does the EU's MiCA Regulation mean for Crypto Companies?
The EU recently introduced a new regulation called the Markets in Crypto-Assets (MiCA) in order to regulate and supervise the…
23 Jan 2024
chevron-down