When it comes to money and finances, security and transparency are of the highest importance. Therefore, the financial industry is one of the most tightly regulated industries in the world.
In the European Union, all registered financial institutions and financial service providers, brokers and exchanges – hence, also Blocktrade – must comply with strict guidelines among which EU directives.
The two central obligations are to conduct Know-Your-Customer (KYC), Know-Your-Business (KYB) and Anti-Money-Laundering (AML) checks. In today’s post, we explain what these terms mean, how these measures work and why undergoing them is in your interest (as it serves your safety and security).
What does AML stand for?
The term ’’AML’’ is an abbreviation for anti-money-laundering. In short, it encompasses a number of measures intended to prevent individuals or organizations from laundering money.
What exactly is money laundering? The European Commission (EC) defines it as “the process by which criminals clean the benefits of directories to hide their illegal origin”. The goal of AML measures, therefore, is to ensure that the true source of the wealth or original flow of money or deposit is known and comes only from legal activities.
What does KYC/KYB mean?
Financial service providers must also implement KYC/KYB procedures. In short, financial service providers must gather certain personal information and details of their customers (businesses and individuals) and verify the identity of these parties to confirm the validity of the provided information.
The goal of KYC/KYB is that only known and verified organizations and individuals can engage in financial transactions, so it is known between which parties money flows.
AML questionnaire
You pass the AML process by answering all the questions posed in the AML questionnaire. Most of these questions relate to the “source of funds/wealth” – in other words, you have to state where the money you will be depositing actually comes from. This is done to ensure that the origin of the funds is known and only comes from legal activities (hence, preventing money laundering).
Users must further state if they will trade on their own or on somebody else’s behalf and how often or frequently and with what volume they roughly plan to be trading, as well as a rough indication of annual income.
The sum of these information is gathered and regularly checked against the actual account behavior in order to check for potential suspicious or unusual (and changes in) trading activity.
KYC/KYB process
In order to complete the KYC/KYB process which follows the AML questionnaire right after account registration, users must enter personal information, for example their
- full name,
- date of birth,
- place of residence address,
- contact details like the email and phone number.
Legal requirements dictate that all users must provide both a proof of identity and proof of residency.
- Proof of identity can be provided by submitting a scan of a current passport or national ID.
- Proof of residency is completed by submitting a scan of a utility bill (bill must clearly state the user’s address).
Why do I have to do it?
Admittedly, completing an AML and KYC/KYB check is a small burden for users when registering with the financial services provider. While the process does not take more than 10 to 15 minutes at most, it is worth remembering that these procedures are ultimately in the user’s best interest and there to guarantee their security and the safety of their funds, after all none of us want to be responsible for financing terrorists or other crimes.
AML and KYC/KYB checks have to be passed for compliance of the exchange with legal regulations. The result of these procedures benefits users as they can trust that they will only trade and interact with trustworthy users at the exchange which is fully audited by the respective financial regulator. What a good feeling to know you can trade with safety and confidence!
Next time you receive an email from Blocktrade asking for additional information on a transaction you will now know why we do this: Your safety is always our importance and if you are unsure about the reasons for us asking, just shoot us an email. We are always happy to provide you with more information and transparency about our processes.
