Protecting the crypto system: The importance of KYC and AML!

In today’s world, financial transactions are increasingly carried out online, whereas in the crypto world, transactions are only carried out online, making the need to combat fraud and scams more urgent than ever.

Among the tools that ensure our security in these operations are Know Your Customer (KYC) and Prevention of Money Laundering and Terrorist Financing (AML).

What is KYC?

KYC, or “Know Your Customer”, is a process by which crypto companies and financial institutions verify the identity of their customers. This involves obtaining information such as full name, address, contact details and verifying the authenticity of identity documents.

Most of these processes are nowadays carried out online and in many cases by companies approved by entities such as SEPBLAC.

What is AML?

AML, or “Anti Money Laundering”, is a set of measures aimed at preventing money laundering and terrorist financing. These measures include the monitoring of both fiat and crypto transactions, the reporting of suspicious activity and the implementation of controls to prevent persons or entities involved in illicit activities from accessing both the financial system and the crypto system.

Why are KYC and AML important and necessary?

Effective implementation of KYC and AML offers numerous benefits for the financial system, the crypto system and society at large:

  • Combat fraud and scams:

By verifying the identity of customers, it reduces the likelihood that people intent on committing fraud or scams will open accounts or conduct transactions in both sectors.

  • Protects the integrity of such systems:

KYC and AML help prevent financial systems (Fiat and Crypto) from being used for illicit activities, such as money laundering, terrorist financing and corruption.

  • Build trust in the financial system:

When customers know that financial institutions (Fiat and Crypto) are taking measures to prevent fraud and illicit activities, they feel more confident when transacting and depositing their assets.

  • Promotes transparency:

KYC and AML oblige financial institutions to keep detailed records of their customers’ transactions, making it easier to identify those who engage in illicit activities or attempt to do so.

  • Protects customers:

By preventing those involved in illicit activities from opening accounts or conducting transactions, KYC and AML help protect legitimate customers from falling victim to fraud or scams.

Ultimately, KYC and AML are essential tools to ensure a safe, transparent and reliable system. Their effective implementation benefits all stakeholders, from financial institutions (Fiat and Crypto) to individual customers, contributing to a more robust and protected economic environment for all.

As a suggestion, although challenging, these KYC and AML processes should be applied to social networks, as it would be a very important step forward in the fight against fraud, scams and illegal content which, unfortunately in recent years, are being carried out by unscrupulous people to defraud the most vulnerable in the most unpunished way.

Disclaimer: The information set out herein should not be taken as financial advice or investment recommendations. All investments and trading involve risk and it is the responsibility of each individual to do their due diligence before making any investment decision.

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