Fraud is on the rise and unfortunately, businesses are still unable to fight
these frauds with efficiency. One of the major reasons behind this is a lack of
uniformity in the fraud prevention practices in businesses around the globe.
This uniformity can be achieved with regulatory compliance because most of the
KYC/AML regulations around the globe have the same laws and features.
KYC compliance is becoming a vital ingredient of growth and retainable market
value, which is difficult to achieve in the current scenario of fraud and crime.
Businesses and banks are accepting the significance of KYC compliance and it has
lead to an increasing trend of KYC and AML compliance. But this trend is
flourishing in the virtual assets industry as well. This industry has a huge
potential for growth and has a significant risk of financial crime, so
future-oriented businesses are investing in KYC compliance.
Let’s see what are the primary reasons behind an increased trend of KYC
compliance among virtual assets businesses.
Increased regulatory scrutiny
Now that the industry is growing rapidly bagging huge customer value, it’s vital
to shelter this growth from fraudsters or the world might face an epidemic of
financial crime channeled through this industry. Virtual assets are now brought
under the scope of KYC and AML laws previously implemented on the financial
institutions. It helps them to onboard only secure clientele.
FATF recommended adding virtual assets dealers under the scope of AML/KYC laws
implemented on financial institutions. EU’s 5AMLD also incorporated a clause to
bring virtual assets dealers under the shelter of KYC laws. In the U.S three
bills related to cryptocurrencies are in the pipeline that will bring this
industry under the strict scrutiny of regulatory watchdogs.
The Swiss regulatory authority has given banking certificates to two pure-play
cryptocurrency banks. This initiative is taken to promote the rise and growth of
Fintech in a secure environment.
All these regulations and many others are implemented or in the pipeline to
bring the virtual assets dealers under the regulatory radar. This has made KYC
compliance inevitable for these businesses. Non-compliance will result in huge
financial losses which may prove to be a killing blow for many businesses as
most of the virtual assets dealers are startups as this industry is still new
and immature to handle huge financial losses.
Increase in fraud
Everyone knows that in today’s digital world, fraud has increased but very few
know that it is equally prevalent in businesses dealing with virtual assets.
CipherTrace a crypto analytics firm found that cryptocurrency lost a staggering
$4.4 billion in the first three quarters of 2019 due to fraud. This shows that
the risk of fraud is quite high in the cryptocurrency and the only solution to
fight this huge amount of fraud is to onboard only secure clientele. As the
growth of fintech and decentralized cryptocurrencies has served the unbanked and
increased the risk as well. KYC compliance will help virtual assets dealers to
grow without the fear of fraud and crime prevailing in their society.
Virtual assets are used widely around the globe and the growth of this industry
is predicted to be quite high. But this growth is possible if it retains the
positive customer value in the future. If the fraud kept on increasing at this
pace, the tarnished fame of virtual assets will be a hurdle in achieving and
retaining the growth. KYC compliance will be an effective tool to fight fraud.
KYC compliance is equally significant for virtual assets dealers. It ensures
retainable growth, customer value and a bright future for the businesses. The
trend of KYC compliance in this industry is still new but most of these
businesses are investing in AI-based KYC screening solutions that go well with
the speed and automation provided by cryptocurrencies. These solutions screen
and verify the identity documents in real-time and if it’s powered with
biometric authentication it verified the face of the person and matches it with
the face on the identity document. Another benefit is these solutions are used
So compliance could help virtual assets dealers in achieving numerous benefits
such as compliant status, secure customer onboarding, fraud prevention,
financial loss prevention, increased customer value, increased market value,