Compliance with Anti-Money Laundering (AML) regulations is essential for new and existing crypto businesses, especially if they are looking to scale by launching into new markets. Global regulators and market players are taking a much closer look at crypto, so businesses can’t afford to cut corners regarding Customer Due Diligence (CDD) protocols.
Beyond complying with multiple regulatory regimes, crypto companies looking to launch into new markets need to understand and adapt to new markets and their unique contexts, and systematize diverse types of documentation that are very often in multiple languages.
All of these challenges leave many crypto companies hesitant to pursue further expansion – in particular startups and those with limited resources. After all, achieving all of the above in one country can be complicated enough, so doing so in multiple jurisdictions must be exponentially more difficult. Or is it? As we’ll see, it doesn’t have to be.
By using automated Know Your Customer (KYC) technology, crypto companies can achieve several key goals:
- Reach users in new markets quickly and securely
- Comply with local regulations
- Adapt to new markets and languages
- Build trust among users
- Increase onboarding rates and reduce dropout rates.
More and more countries are placing crypto companies under the scope of Anti-Money Laundering (AML) regulations. Accordingly, crypto businesses have to implement KYC solutions as part of their Customer Due Diligence (CDD) procedures.
Let’s take a closer look at some of the key steps involved in adopting an automated KYC solution – and the benefits it can bring for crypto businesses.
One of the most complex challenges for crypto companies – and indeed any other company that is regulated as a financial institution or virtual asset service provider (VASP) – is complying with constantly-evolving regulations.
Operating in different jurisdictions often means complying with diverse legal regimes – even if a company is simply offering their services to customers in a foreign market. So crypto companies need to be aware of the legal requirements they will be subject to in different regions.
For the EU, this means complying with regulations that include its 5th Anti-Money Laundering Directive (5AMLD); in the US, it’s the Banking Secrecy Act (BSA), and in the UK it means complying with rules set out by the Financial Conduct Authority (FCA). But these are just some of the main ones.
For crypto companies that are growing and launching into new markets, having a KYC onboarding system that provides comprehensive verification for diverse regulatory regimes is critical. Using a professional KYC provider can effectively address this challenge without the need of building large and expensive in-house compliance teams.
Selecting the right KYC provider for a crypto business should take into account several key criteria:
- How specialized they are in the regulatory requirements of jurisdictions they intend to do business in.
- How customizable their onboarding platform is for the specific needs of the business
- How seamless, effective and efficient the solution is in practice – does the solution provide a perfect balance of function and compliance without negatively impacting customer experience?
By using a professional automated KYC provider, crypto companies and other VASPs can integrate customized, jurisdiction-specific regulatory checks that ensure they are compliant in the places they do business in.
In parallel, different jurisdictions also carry different amounts of risk. By using an automated KYC solution that is built around a risk-based-approach to compliance, crypto companies can ensure they are properly factoring in a specific country’s risk profile when onboarding a customer who is in that jurisdiction.
For instance, a potential customer who is located in a country with a poor record for financial oversight, online fraud and/or money laundering can be requested to submit additional documentation, or subjected through more enhanced verification methods such as liveness checks or other enhanced due diligence procedures.
It’s therefore important to choose a KYC provider that offers compliance checks that have been specifically designed for the jurisdictions they operate or plan on launching in. KYC-Chain offers checks that are adapted to local documentation and contexts – and ensure global KYC AML compliance.
Adapting to new markets and local documents
Verifying the identities of customers is such a key cornerstone of financial regulations because it is a baseline way to ensure users are accountable for their actions.
And beyond complying with AML regulations, one of the main reasons to implement KYC is to prevent fraud from occurring on your platform, or of a service provider falling victim to it themselves.
One of the main challenges for crypto companies looking to enter new markets is how to understand, process and standardize diverse types of documentation that customers need to provide in a KYC process.
Different countries often use very different types of documents for ID verification, and what would be considered invalid in some countries is considered valid in others. Likewise, some countries have non-standardized types of ID documentation, while others have publicly-accessible databases where ID numbers can be verified – the list goes on.
Advanced KYC solutions can quickly address these challenges, using a combination of various technologies and customized processes that are pre-programmed to factor in the nuances of different countries’ documentation types.
By using technology such as optical character recognition (OCR) extraction, a proper KYC solution can automatically scan submitted documents in a wide range of languages, and codify the information into uniform data that is then checked against verified databases.
Improve customer experience and build trust
While compliance with global and national AML regulations and anti-fraud provisions are critical steps for crypto companies seeking to expand into new markets, doing so in a way that doesn’t create unnecessary or irritating barriers for customers is important too. Forcing potential customers to go through drawn-out KYC processes can result in high dropout rates and can end up severely impacting a crypto companies’ business.
That’s why it is so important to choose a KYC provider that offers a customized onboarding solution that places customers’ identity verification experience at the center of the onboarding journey.
From using an RBA to ensure customers are only subjected to the checks their risk profile demands, to adapting to local languages, documentation and regulatory nuances – a professional KYC solution will guide potential customers through the process effortlessly and with as little friction as possible.
Finally, using automated KYC can help crypto companies build trust with their customers. When customers know that a business is taking steps to verify their identities, this demonstrates that the company is dedicated to transparency and compliance – and has invested for the long haul.
The question for crypto businesses is not if they should invest in KYC tools, but which KYC solution provider will be best suited for their needs. A professional provider should be able to create and maintain dynamic, customized solutions that quickly adapt to regional specifications.
A better, more streamlined verification flow is essential for scalability and compliance, so crypto companies should choose a KYC solution with high standards and innovative features to help the business grow.
Looking for an automated KYC tool that can be your end-to-end compliance solution, whatever jurisdiction you want to launch in? Get in touch and we can discuss how KYC-Chain can make it happen.