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Best practices for KYC/AML

How to
2022-07-28
4 min read

Building a Sufficient KYC Process for Crypto Businesses

Sumsub has prepared a complete list of verification tools to ensure compliance and high pass rates for crypto businesses.

Crypto businesses face a wide choice of KYC providers. To make the right decision, it’s critical to ensure that the provider offers a sufficient number of checks, ensures compliance, avoids penalties, and detects illegal activity. 
While implementing KYC procedures is essential for companies, they risk lowering pass rates by piling on too many checks at the onboarding stage. Therefore, crypto businesses often separate KYC checks into several stages. At each stage, customers provide a new set of information, which breaks up an otherwise long verification process into several smaller steps.

The highlights

  1. Registration and Identification
  2. Verification
  3. Crypto Transaction Monitoring
  4. Service Usage
  5. Know Your Business
  6. Conclusion

Registration and Identification

At this stage, companies collect the customer’s basic information, such as name, email, phone number, date of birth, or address. Typically, customers do not need to submit documents yet, which also means they cannot perform financial transactions. To collect more detailed information, for instance “purpose of business relations”, companies can use Questionnaires

By keeping initial registration fast and simple, companies can achieve higher onboarding rates. 

Verification

The verification stage can be divided into five different checks:

ID verification. Before making a transaction, companies need to identify and verify a customer based on documents and information acquired from reliable sources. For this purpose, customers are requested to upload their ID. The provided document then gets checked for image authenticity, integrity, and the validity of data. 

Sumsub can also cross-compare documents from many countries using reliable external databases. Learn more about this by requesting a free demo.

Liveness check. This is a facial biometric check that ensures that the customer is a real person. This result is achieved by scanning the applicant’s face and creating a 3D face map. 

Crypto businesses can also use liveness to filter duplicate accounts on their platform. This is done by comparing the user’s face map with the photo on their identification document to ensure that customers don’t create repeat accounts.

Liveness can also streamline the login process for mobile applications, further boosting pass rates.

Proof of Address. According to most AML regulations, companies need to check the customer’s address. Proof of address documents may include bank statements, utility bills, tax bills, and many more. However, such documents are easy to forge.

Verification providers can automatically verify if a PoA document has been graphically edited and extract address information for comparison against various data sources. 

Proof of address can also be obtained by determining the geolocation of the customer. This option can simplify the onboarding process compared with traditional PoA document verification. However, it should be noted that jurisdictions don’t yet have an official opinion regarding geolocation as a primary method of verification. Still, geolocation can be included as a complementary check to minimize illegal activity.

Sanctions and AML screening. Crypto businesses have to implement Anti-Money Laundering (AML) screening to check whether their customers are featured within any sanction lists (OFAC, UN, HMT, EU, DFT, etc.), PEP lists, adverse media, and so on.

Beyond the onboarding stage, companies have to monitor their clients on an ongoing basis, in case they end up on a sanctions list later on. 

Sumsub monitors 10,000 data sources every hour and 5 million articles every day to meet all global and local AML requirements. Get in touch with us today!

Questionnaires. Crypto companies can also employ questionnaires at the verification stage to collect additional data, documents or information – for example about the purpose of the business relationship with the company, supposed amount of transactions, and so on. This feature can be customized both in terms of questions and reasons to send it to customers. 

Crypto Transaction Monitoring

Businesses must monitor crypto transactions on an ongoing basis to identify unusual or suspicious transactions, including those that pose a higher risk of money laundering or terrorist financing. To do this, companies can check crypto wallets addresses to estimate the risks associated with a specific transaction.

Service Usage

There are several other procedures that can be implemented by crypto businesses when building a verification flow. These can be employed across different stages.

Bank card verification helps confirm that a bank card belongs to the person passing verification. This helps crypto businesses prevent fraud, unfair chargebacks, and third-party involvement in payment processing by ensuring that bank cards actually belong to applicants.

The process extracts data from provided bank cards, which gets cross-compared to data provided earlier (e.g, name, date of birth, etc.). This type of verification can be a part of the onboarding procedure, or set up as a separate check triggered by a user action.

Face authentication can be requested before transactions or during repetition of authentication processes. This can be a liveness check or an uploaded customer photograph. The purpose is to ensure that the true account holder performs a financial action.

Crypto businesses can use a combination of the above to minimize illegal activity by customers. 

Know Your Business Checks

Crypto businesses can also use Know Your Business (KYB) solutions to verify clients that are companies. As a rule, the KYB checks consist of:

  • Analysis of provided corporate documents;
  • Establishment of full ownership and corporate control structure;
  • Validation via relevant sources;
  • AML screening.

Just like when verifying individual customers, crypto businesses can use KYB providers to build their own verification process. This can help businesses increase their number of onboarded users while complying with international and local regulations.

Conclusion

When building a verification process, crypto companies should ensure that they don’t lose the pass rates when complying with the regulations. That’s why crypto companies can benefit from separating checks into different stages.

As long as companies comply with the regulations, they can build a KYC solution according to their interests. Thus, companies can put more checks after registration, when customers are already more inclined to continue working with them. 

Contact Sumsub today to learn how to build a sufficient KYC process. Request a demo today!

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