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Importance of KYC/AML in Crypto Finance

When you open an account with PayPugs, be it as a client or an introducer, as an individual, or as a corporate, you are required to submit various documents for us to be able to meet the international anti-money laundering (AML) requirements, which includes the know your client (KYC) information. 

Performing effective KYC checks reduces the threat to our society from  identity theft, financial crimes such as money laundering, corruption, tax evasion, and terrorism financing.

There are four primary objectives when gathering KYC information.

·   Identify the client

·   Verify the client’s true identity

·   Understand the client’s activities and source of funding

·   Monitor the client’s activities

KYC process steps can include client identification, due diligence and enhanced client due diligence. The identification process requires verifiable copies of identity documents, usually those issued by a government. 

Due diligence is an ongoing process of collecting the available data on a client and continuing to monitor these during the relationship. Enhanced due diligence is confined to high-risk clients, deemed so by virtue of their sector, political or geographic status.

Our onboarding procedure includes you completing and submitting an AML check form, which contains a list of all the primary documents and information you need to supply to us with. As part of the AML check you could be requested by our Onboarding team to submit further documents.

Unfortunately, we cannot not always predict exactly what information may be requested, as it differs from case to case, and this is why you will have a personal Onboarding Specialist to guide you through the process. 

During this process we properly start to get to know you and your business so that we can effectively meet your needs. The final step is the registration and verification on our website.

Our Onboarding Specialists work within a culture of ethical practice that’s communicated from the top down. Regular training policies and processes that are applied consistently across the organisation are the hallmark of our people.

We take a comprehensive approach to risk assessment and quantification, based on your jurisdiction, your country of residence, the technical features of our products and services and also take into account our policy towards affiliate businesses and partnerships. 

We tailor risk assessment for each unique jurisdiction, as well proactively gauging the inherent risk of existing and future regulations in the considered jurisdiction.

In 2021, the EU will see significant changes with the introduction of the 6th Anti-Money Laundering Directive (6AMLD). This directive requires the member countries to take concrete steps towards elimination of risk associated with virtual assets. 

The reporting entities such as crypto exchanges, digital asset exchanges, cryptocurrency dealers, crypto wallet providers and businesses accepting cryptocurrency payments will be facing some major AML/KYC compliance scrutiny in 2021.

In the US, the Anti-Money Laundering Act of 2020 will bring in a new era of AML enforcement and regulatory exposure for financial institutions in the US and by extension to their counterparties and affiliates across the globe. 

The AML Act significantly expands the statutory authority to seek documents from foreign financial institutions. The Department of the Treasury and the Department of Justice are authorised to subpoena a foreign financial institution that maintains a correspondent account in the US.

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