Bitcoin goes bullish

DO crypto KYC exchanges offer better protection to  their customers ? [AML/CTF]

Crypto KYC – If you’ve ever had a stint with the finance industry, you will sure consent to the fact that security and caution are two watch words.

Generally money is a scarce commodity, whoever takes custody of it must prove to be worthy of such tax. While considering the suitability of custody, integrity likewise comes in.

With this notion in place, custody of funds is to be given every regard it deserves.

The purpose of this guide is to further educate you on the need for routine KYC while carrying out cryptocurrency transactions.

What is KYC?

This acronym simply means “Know Your Customer.”

This does not stop at knowing your customer’s name, phone number or favorite meal not even their high school friends are in contention here.

Know Your Customer is a practice where financial institution is expected to acquire a firsthand detail and information of her customer.

By this requirements, the institution will have to get acquainted with the customer’s full name, date of birth, BVN, utility bill, a copy of government verifiable ID card.

Read also: How to send Bitcoin to Nigeria via Rapidpay

Premise Verification Report should be carried out where it’s unavoidable, this is to ensure the financial institution in question has every detail intact, in case the law enforcement agent requires such information in event of fraud etc.

This will in essence ensure the financial institution stays accountable as to how the customer runs his/her financial activities to avoid fraudulent practices.

Most customers often try to boycott the KYC process, when this happens, it’s a clear pointer that should raise a red flag to the nature and intent of the customer’s business.

Basic importance of KYC

Being a provision of governing regulatory body, financial institutions pay detail attention to KYC for the following purposes;

  • It gives an insight into possible verification of client/customer’s true identity
  • With proper KYC in place, it helps the financial institution to identify and classify customers in order of nature of risk they could constitute, thereby provides an avenue to follow a proper reporting standard to ensure that such customer does not endanger the institution in any way
  • As you are aware, KYC is a requirement of the apex financial regulatory body, the financial institution by this requirement ensures compliance to avoid possible sanctions for the violation of such regulation.
  • Effective KYC reduces the potency and possibility of Anti Money Laundry practices by the customer.
  • Financing of terrorist activities are on the rise, KYC could deter, provide insights and possibly frustrate such activities since those involve would like to hide their true identity.

Understanding the term AML

To understand the concept of Anti-Money Laundering, it becomes necessary to understand the process called “Money Laundering” itself.

Read also: Beginner’s guide to Bitcoin investment in Nigeria

Money Laundering (ML), this is the process where money gotten from illegal practices or activities are being made to look genuine. The essence of this practice is to enable the money a safe transit and landing to its final destination, which supposedly the economy through the financial institution.

There are financial guidelines and policing strictly against these kind of funds, since the processes that gave birth to such funds promote crime, social vices and other forms of societal ills.

Some of these activities could be drug pushing, robbery etc. These activities gave birth to Anti-Money Laundry regulations.

Anti-Money Laundry

Now this involve existing regulations and laws strictly made to prevent the activities of money launders at every level, which usually is disguising ill-gotten funds, with such impression of making them look genuine as though they are proceeds of genuine businesses activities.

This could also be referred to as laws and regulations purposely made to combat financial crimes at all levels.

Now this doesn’t just happen, these funds undergo different stages to finally mix up with other funds and look clean, void of any kind of suspicion by regulatory authorities . This then leads us to various stages of Money Laundering.

Stages of Money Laundering

Money Laundering passes through three successive stages to finally appear clean. These stages are;

  • Placement
  • Layering and
  • Integration

Placement – This involves the initial movement of such money from its source, then placed into circulation, usually via financial institution.

Layering – In the layering stage, the money becomes far difficult to be detected as ill-gotten funds. By this approach, they make trailing of such funds difficult for the law enforcement agents.

By this arrangement, the funds are converted to instruments like cheques or assets purchased with such funds then sold to make it look like proceeds of investment.

Integration – This happens to be the final stage of the Money Laundering process, at this point the money makes its way into the economy through the banks and appears clean void of any form unusual identity, at this point the aim has been achieved successfully.

While this is about Money Laundering, this guide will also do justice to its twin brother terrorist financing.

Terrorist Financing

Most times the proceeds of Anti-Money Laundering end up into financing terrorism, which in itself has become a pandemic to Nigeria and the world at large.

The growing bounds of the activities of Boko Haram militia, ISWAP and other forms of banditry is a pointer to the resultant effect of Money Laundering activities.

In essence, terrorism is only sustained by adequate financing through which they recruit members, purchase ammunition to further strengthen their girt.

Terrorist financing is the provision of funds for terrorist activity, which could have come from Money Laundry and other sources.

Now let’s take a holistic look at what Money Laundry and Terrorist Financing has to do with Cryptocurrency ( Crypto KYC)

Crytocurrency exchanges like the traditional financial institutions now adopt the use of KYC to at least meat regulatory and safety requirements in cryptocurrency transactions.

This is very important to mitigate against fraudulent activities that may rise as a result of managing and transacting with cryptocurrencies.

With KYC in place, the exchanges are acquainted with certain details of the customer’s transaction nature, history which will enhance compliance with regulatory standard.

Recall, cryptocurrency is not controlled by the government of any nation of the world or Central bank, it’s not regulated so its activities are strictly independent, customers prefer it particularly for low fees and ease of doing transactions.

Since the regular financial institutions strictly apply the use of KYC, accomplice of Money Laundering and Terrorist Financing may just use crypto as safe heaven to perpetuate their acts.

This is why a Crypto KYC should be formalized across board.

The effect of terrorist financing is very obvious and one of the leading cancers that’s eating deep into the fabrics of Nigeria.

No doubt KYC offers better protection to customers since one may not have access to your wallet with security measures in place.

The opportunity bitcoin and other cryptocurrencies provide must not be abused, however if Crypto KYC is not enforced strictly, there’s bound to be unsavory news of all times.

That said, it’s very necessary to ensure compliance of crypto KYC amongst the Nigeria’s exchanges, to further mitigate the scourge of the rising trend of insecurity.

Have a contrary idea or opinion about crypto KYC, let’s hear you out at the comment box.




















Leave a comment