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KYC verification: what is it and where is it used?

What is the KYC procedure and why is it paid so much attention? We will tell you how it can protect you from fraudsters while maintaining anonymity. KYC- and AML-checks: why identity verification is necessary in the cryptocurrency sphere. KYC (Know Your Customer) is a procedure for verifying the client’s identity and assessing potential risks from him. But why is it necessary and why today is it almost impossible to buy cryptocurrency without verifying your identity? Does not it contradict the original principles of anonymity and decentralization of the crypto industry? Today we will analyze what AML- and KYC-checks are for and how they work. We will also tell you how verification helps to reduce the number of fraudsters while maintaining basic users’ anonymity.

What is AML and what is it for?

Anti-Money Laundering is a set of measures to counter money laundering, terrorist financing and the creation of weapons of mass destruction. This procedure includes the identification, storage and mutual exchange of information about customers, their profits and transactions between financial institutions and government departments. Most classical financial institutions use AML measures to check a business that works with cash or uses cash as one of the main assets. They also check those enterprises that have money in different accounts, regularly transfer them to other countries and banks, buy futures and other instruments for cash settlement. In other words, all businesses that can potentially bypass financial monitoring and launder funds fall under verification.

Total risk

Total risk (in percent) – the probability that the address is associated with illegal activity.Risk sources– known types of services the address interacted with , and the percentage of funds received from / given to these services, for which the total risk is calculated.

Why does the service insist on such checks?

If the service does not conduct such checks, then fraudsters can use it as a platform for money laundering and terrorist financing. And then the service itself will be held accountable. That is why exchanges and other large cryptocurrency companies implement AML requirements in their business and conduct regular KYC verifications.