KYC is one of the most controversial topics in the crypto trading process. The number of exchanges, crypto exchange services, and banks that require KYC verification is growing with each day. Therefore, it is very important to have a clear understanding of this procedure. Today we will take a closer look at the value of KYC/AML, as well as the pros and cons of this procedure for corporate and individual clients.
What are KYC and AML policies and why are they needed?
KYC is the process a company uses to verify the identity of its customers, evaluate their suitability, and make sure that the payment will not be related to money laundering, terrorist financing, or tax evasion.
The KYC (know your customer) procedure is a part of the anti-money laundering or AML system used to fight money laundering. The task of AML itself is to control customer accounts and identify suspicious transactions.
Identity verification, namely KYC for cryptocurrency trading, was introduced to let companies make sure that they are doing business with a legitimate client.
Pros and cons of KYC for individual clients
The main goal of KYC is to verify the identity of a person, which is diametrically opposed to one of the key points in the crypto trading sector — anonymity. However, it is this paradox that ensures the transparency of transactions and security for both parties. And this is extremely important.
Pros:
· For investors, KYC helps to ensure the security of their personal data add prevents the capture of the account by fraudsters.
· KYC allows clients to quickly restore their accounts in case the access has been lost.
· KYC helps individual clients to avoid reputational, tax, and legal inconsistencies or problems.
· KYC establishes the level of trust between buyers and sellers. Without KYC, sellers are completely unaware of who their customer is, which means they cannot protect themselves from malicious activity.
Cons:
· KYC is perceived as an additional barrier to entering the crypto trading market.
· The KYC procedure may raise concerns of investors about the privacy and security of their personal data.
Summary.
The main reason KYC is important for individual customers is that it protects them from account theft, identity theft, or duplicate account use.
Pros and cons of KYC for corporate clients
KYC and AML allow corporate clients to comply with regulatory requirements in the crypto trading process.
Pros:
· KYC and AML allow companies to attract more customers with a good reputation.
· KYC helps optimize some business processes. It can be easily implemented in an organization, whether as a document-based verification or a technologically advanced technique such as facial recognition.
· Completing the KYC process protects corporate clients from reputation loss and receiving fines.
Cons:
· Data storage requires using additional resources to ensure full compliance with GDPR rules.
· If customer data has been compromised, penalties can reach up to 2% of a company’s global annual income.
Summary.
KYC helps corporate clients to establish legal business relationships and be confident about their partners, as well as ensures the security of crypto exchange and the reliability of business relationships.
Conclusions
When it comes to anti-money laundering, it is critical that corporate and individual clients complete the KYC procedure.
Nowadays, the number of users who are afraid of going through the KYC procedure is decreasing rapidly. Many people understand the importance of regulating the cryptocurrency market and the objectives of the AML policy and KYC procedure.
Cryptocurrency exchange service Cratos strives to provide a fast, high-quality verification procedure for its clients.
The KYC procedure is aimed at minimizing the number of criminal activities and ensuring the safety of both parties. Figuratively speaking, it is a protective measure for crypto exchange services and their clients that allows both parties to conduct business transparently.
