If you’re a member of the cryptocurrency community, you probably already know that there’s a lot of talk about money laundering. You may also be aware that you need to be compliant with the law to avoid committing this crime. Here’s a short list of things you should do to be compliant.
Getting a cryptocurrency license
As we all know, a crypto exchange is not allowed to operate without a license. Cryptocurrency is a legal form of currency, and it is regulated in many jurisdictions, but not all of them. Some are outright banned in order to protect the financial system from criminal activities.
The cryptocurrency industry has experienced its fair share of controversy over the years, and a few have been cited as the cause of some high profile money laundering investigations. In the simplest of terms, a cryptocurrency license is a piece of paper that gives you the ability to conduct legal transactions with digital currencies. Obtaining one allows you to exchange your cryptocurrency for fiat money, manage your assets, and even store encrypted client keys.
Getting an AML policy in place
If you want to keep your company on the right side of law, it’s important to have an AML policy. This type of policy helps to prevent money laundering, a process that can lead to criminal charges and can destroy your business.
There are a few things to consider when implementing an AML policy. First, you’ll need to hire an AML officer. You’ll also need to verify the identity of your customers. Additionally, you’ll need to have a fiat bank account for your exchange.
Once you have all of the above in place, you can start developing your AML policy. It’s best to have it in place early on in the life of your company.
Separating financial terrorism from tax evasion
Terrorism and tax evasion are not the only reasons for criminals to take to the dark web. Aside from the economic impact of the proceeds, these illicit funds are corrupting the fabric of society. To combat this, governments have implemented effective measures in the form of legislation, enforcement actions, and public education. These initiatives can include measures such as the use of the CIA’s Global Intelligence Directorate to target terrorist financing networks, the use of civil penalties for financial crimes, and the formation of an intergovernmental body in the form of the Financial Action Task Force (FATF) to develop policies to protect the global financial system.
AML officers must be hired and fiat bank accounts must be opened
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Creating a KYC (Know Your Customer) procedure
If you’re looking to protect yourself and your business, you need to develop a KYC (Know Your Customer) procedure. These procedures are legal requirements that prevent money laundering and help you verify customer identities. They can also prevent you from making mistakes.
This procedure involves several steps that ensure your customers’ identities are real. It involves collecting customer information and conducting risk assessments to identify potential threats.
Several financial institutions use KYC to monitor and report suspicious activity. In some cases, high-risk accounts may be asked to provide explanations for transactions or be monitored more frequently.
Keeping your customer’s identity secure is critical to preventing terrorism financing and run-of-the-mill fraud schemes. The process helps financial institutions identify suspicious activity before it reaches a level of harm.
Preventing the collapse of the cryptosystem
The collapse of FTX has highlighted the need for tighter crypto controls. Several firms have had license applications rejected and some jurisdictions have imposed restrictions on transactions on global exchanges.
The most recent high-profile example was the collapse of the largest cryptocurrency exchange in the world, FTX. It was founded by Sam Bankman-Fried who amassed a fortune of more than $20 billion before he abruptly shut down the business. A few months later, federal authorities arrested him on charges of money laundering and conspiracy. He was also found guilty of committing the tiniest, but most gimmick-like, of all things: wire fraud against customers.