In the young world of cryptocurrencies, some people use them for illegal activities like money laundering. Criminals take advantage of the decentralized and anonymous nature of crypto to engage in financial schemes. Combating these challenges is crucial for the growth and trustworthiness of the crypto industry. In this article, we will talk about the importance of KYC verification and AML check my wallet function on crypto exchange platforms.

What Do KYC Checks Mean in Crypto?

KYC (know-your-customer) is commonly used in traditional banking services. It is a standard procedure where banks verify the identity of their clients to ensure compliance with regulatory requirements. KYC involves collecting and verifying information such as names, addresses, and official identification documents to prevent identity theft, fraud, and other financial crimes. The same works with insurance companies and with the development of the crypto industry, it has touched upon centralized crypto exchanges, especially those providing fiat-to-crypto exchange services. 

When users register on a crypto exchange, they need to provide the required information:

  • full name, date of birth, and address;
  • government-issued ID or passport;
  • sometimes exchanges ask for utility bills or bank statements, to verify the user’s location;
  • some exchanges require users to submit a photograph or selfie for additional identity verification;
  • in certain cases, exchanges may perform enhanced due diligence, which involves more rigorous checks for higher-risk transactions or individuals.

What is AML?

AML (anti-money laundering verification) is a broader team, that includes KYC. It’s a range of procedures and regulations aimed at preventing and detecting illegal activities related to money laundering and the financing of terrorism. In the case of crypto exchanges and service providers, AML aims to detect and report illegal activities where digital assets are involved. AML includes:

  • KYC;
  • monitoring of transactions;
  • recording to a transaction history;
  • enhanced due diligence (EDD);
  • verification of the source of funds;
  • reporting and cooperating with regulators.

These practices ensure that cryptocurrencies are not used to cover up the origins of unlawfully obtained funds. Both crypto exchanges and financial institutions dealing with digital assets, as well as wallet providers, must implement AML practices. AML checks conducted by wallet providers involve assessing transactions, sources of funds, and overall wallet activity to ensure compliance with regulations and prevent involvement in money laundering or other criminal activities.

Anti-money laundering and KYC procedures are crucial standards to follow in the crypto space. By adhering to these regulations, crypto companies can deter financial crimes, report on them, and thus, contribute to a more reliable financial ecosystem.