The cryptocurrency industry has become increasingly popular in recent years and has transformed from a small community into a mainstream, trillion-dollar ecosystem. As the crypto business continues to grow, so does the need to maintain financial safety. We’ve seen financial crime and fraud rise within this industry, and with this comes the need to protect customers and businesses with anti-fraud measures. One critical element of this process is crypto identity verification.
Also known as Know Your Customer, identity verification is an essential part of financial security for crypto businesses. In this blog, we’ll explore why ID verification is so crucial, how it impacts your users, long-term sustainability and compliance.
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One of the biggest reasons for crypto companies to implement identity verification is that it’s a legal requirement as part of compliance with financial laws. All financial institutions, including banks, need to have streamlined compliance to prevent financial crimes.
Identity verification is part of Anti Money Laundering processes, which are a requirement as set out by The Money Laundering Act 2017. The rise in crypto has attracted financial criminals and money launderers because of the borderless nature of cryptocurrencies. It’s now compulsory that crypto companies use identity verification procedures and conduct AML checks to confirm the legitimacy of customers and prevent illegal activity.
Crypto identity verification is also crucial as part of counter terrorist financing to protect organisations against terrorism. Not only is it a requirement for all businesses to help flag and prevent financial terrorism, but it also saves your crypto company from being used as a means of illicit activity.
Phishing schemes, identity theft and account hacking have all become popular crimes across crypto platforms. Cybercriminals use purpose-built technology to create false profiles and fake accounts to siphon money or manipulate the crypto market.
Crypto identity verification can help to prevent these crimes and flag suspicious activity. A strong system like TripleCheck can recognise stolen personal data or false personas and flag this data before criminals create fake accounts.
Automated AML checks can detect anomalies in data early on, whilst manual checks can allow fraud officers to assess applicants and determine their legitimacy and authenticity.
Blockchain verification also helps to protect your crypto company from the inside by verifying the identity and authenticity of all staff members.
With financial and cybercrime becoming increasingly common, many users are hesitant to use cryptocurrency platforms, which are much newer and unfamiliar compared to traditional trading and financial platforms.
When customers know that a platform is protected with identity verification and AML procedures, they are more likely to feel comfortable depositing funds and trading with the knowledge that your institution is actively protecting their financial information.
It only takes one cyberattack to damage the reputation of your business and scare customers from returning to your platform. A sturdy Know Your Customer (KYC) program helps to prevent hackers or fraud and uphold your brand reputation as a safe and secure business.
If companies want their crypto platform to become more mainstream, a reputation for safety is essential, and identity verification is the key to achieving this.
Crypto and blockchain platforms can’t function without traditional banks, and these institutions require compliance with AML and KYC regulations from all parties. Users transfer and deposit funds from their bank accounts into their crypto accounts to transfer into this virtual currency, so compliance is vital.
Without a strong identity verification system, crypto companies can encounter a range of issues. Not only may firms struggle to open bank accounts and start up their service, but they will also find it increasingly difficult to integrate with payment processors that use identity checks and AML technology to verify authenticity.
Simply speaking, most crypto platforms are unable to function without ID verification, as their most valuable partners require this feature.
Compliance with AML and KYC regulations isn’t just a legal requirement; it’s a punishable offence to ignore. The cost of failing to comply with identity verification and missing threats during PEP screening is high. Not only can you risk hefty fines, but you can also find your platform shut down and banned from use.
The FCA has already closed 1,600 websites for failing to comply with AML, and other government regulators are continuing to crack down on noncompliance.
If your crypto business finds itself a victim of financial crime or unknowingly aiding criminals because of poor verification systems, there is little sympathy. You may even find yourself at the end of a lawsuit that can ruin your reputation and finances.
Investing in quality ID verification helps to protect your image and platform whilst avoiding expensive fines and even prison time in extreme cases.
Many users are put off by lengthy and outdated document verification and will gravitate towards platforms that make the onboarding process quick and simple. Implementing modern technology into identity verification not only makes the process easier for your crypto business, but it also helps to entice users.
Biometric verification, like facial recognition and likeness testing, can be verified in a matter of seconds, whilst AI technology can scan ID and verify authenticity in minutes. Not only does advanced identity verification ensure the security of your platform, but it also helps to provide seamless onboarding that saves customers and AML officers' valuable time.
Crypto identity verification isn’t just a box to check to avoid sanctions; it’s a crucial process that ensures the safety of your business and your customers. With the right system, you’ll be protected against financial crime, fines, and legal action. You’ll also be able to strengthen relationships with users and partners to ensure the success of your platform.
If you’re looking for a modern solution to blockchain verification, we’ve got the answer here at SmartSearch. Book a demo today and discover how our technology can streamline the KYC/AML process and ensure seamless onboarding for your users.