How can crypto companies meet compliance requirements under the new global regulatory policy?

Not long ago, a social media report forwarded by CZ sparked heated discussions among netizens. According to a report by CoinDesk, Binance lost 90% of its users after implementing KYC (Know Your Customer), which also cost Binance billions of dollars in revenue.

And CZ is even more blunt, Binance has spent more than $1 billion on compliance. Is it worth it for such a high cost? Despite losing a large number of potential users, CZ noted that “Binance’s market share has increased, not decreased.”

How can crypto companies meet compliance requirements under the new global regulatory policy?

What does compliance bring to the crypto world?

In recent years, major trading platforms have spared no expense in compliance. According to data, the compliance cost of a crypto business may exceed 50% of the total time and labor costs. The compliance requirements of various tracks such as CEX, asset management, and wallet are becoming more and more intense.

The increasingly stringent KYC has had a dramatic impact on the industry. But the counter-intuitive phenomenon is that instead of shrinking, the industry has continued to grow in recent years after KYC blocked a large number of potential users. A large number of institutional investors and traditional capital continue to enter the crypto industry, and the scale of the industry has grown rapidly under the blessing of “compliance”.

How to better help the crypto world go into compliance? KYC, AML are the first steps to enter compliance. And ADVANCE.AI provides a one-stop solution for authentication and risk management for the crypto world. The company was founded in 2016, and it is not difficult to judge from the company name alone that it is a high-tech company powered by artificial intelligence. ADVANCE.AI is part of the Advance Intelligence Group, which has 1500 employees in 12 markets, is headquartered in Singapore, and has local customer support teams around the world such as Indonesia, India, Philippines, Malaysia and Vietnam.

Without KYC, projects will be besieged by regulators. For an exchange or institution operating a crypto business, non-compliance can lead to business closures, the payment of fines, and even legal consequences. Due to the lack of regulation, crypto-related businesses suffer from the exclusion of traditional finance.

In the fall of 2019, well-known encrypted messaging app Telegram and U.S. regulators launched a lengthy confrontation. This incident is also often seen as a classic case of non-compliance leading to the death of a project. In the end, the battle ended in a sweeping victory for the regulators. The TON network developed by Telegram was completely abandoned. Compliance is critical to the survival of crypto projects. In 2019, the SEC’s lawsuit against EOS cost EOS $24 million to settle. In 2020, the regulatory agency’s litigation dispute against Ripple has not yet ended.

As research and industry leaders have shown, regulatory compliance, especially anti-money laundering (AML) and counter-terrorism financing (CTF) for blockchain and virtual currencies, has been a huge barrier to its overall mass adoption.

AML helps Web3 avoid money laundering risks

Currently, $139 billion of encrypted assets are traded on-chain every day, and millions of transactions occur on trading platforms every day. If only relying on manual analysis and manual monitoring, it is far from being able to support such a high amount of transactions. Maintaining transaction security from fraud and money laundering can be more difficult in this situation. Therefore, it is critical to have powerful tools to help these businesses meet AML standards.

Can VASP quickly and easily identify the risk of user addresses, just like Web2’s credit report to quickly obtain key information?

To address this, ADVANCE.AI has launched the Crypto Wallet AML risk reporting product. The product can generate AML risk reporting standards for crypto wallets based on historical transactions and regulatory agency sanctions data.

How can crypto companies meet compliance requirements under the new global regulatory policy?

(Example report)

Just enter the wallet address, and the tool can automatically give an AML risk report, and score the address, using 0-99 to reflect the risk of illegal encryption activities.

Clear the fog and trace the massive on-chain data

For a large number of traditional world businesses, entities dealing with blockchain businesses need to ensure that they do not face high-risk transactions or counterparties, but they currently lack efficient solutions. Smart contracts, ICOs, token crowdfunding, etc., which can be used for money laundering or terrorist financing, need to be properly assessed before these activities begin, but there is currently no effective solution. This is mainly determined by the complexity of on-chain transactions.

ADVANCE.AI’s on-chain analysis tools provide clients with on-chain address risk reports. Relying on intelligent risk control, an automated anti-fraud system can replace the previous risk control process that relied on a large number of manual reviews. Through on-chain analysis, identifying fraudulent customer accounts, tracking stolen proceeds, and even identifying links to darknet markets can all be automated by the tool.

This also gives crypto businesses, unable to develop an AML module on their own, the ability to assess the origin and destination of any illicit funds —the key to preventing cryptocurrencies from funding crime.

In short, the product supports continuous monitoring, review and investigation of wallet addresses and transactions with broad asset coverage. With over 350 proprietary risk algorithms, it provides a seamless, scalable solution to the stringent regulatory requirements of CeFi and DeFi. The product can also put the specified address on the monitoring list, monitor all transactions of the address in real time, without manual analysis, and maintain 24/7 vigilance against the risks of specific addresses.

How difficult is FATF’s “travel rule” for crypto compliance?

The regulation of encryption has evolved from scratch, and the regulatory framework continues to iterate. Let’s take the example of the FATF (Financial Action Task Force) October 2021 guidance – which is now a widely adopted regulatory strategy – which requires all VASPs (ie trading platforms) to have AML/CFT measures in place.

For crypto transfers, the platform needs to follow the Travel rule. This rule refers to the transfer of data with the asset. When the transfer of crypto occurs, not only the crypto is transferred from the sender to the receiver, but also the information of the sender and receiver. For example, when A needs to send crypto from A CEX to B’s account in B CEX, then both CEXs A and B should send the data of users A and B to each other.

In the FATF guidelines, the “travel rule” remains an important principle. The guidelines require all VASPs (ie trading platforms) to have AML/CFT measures in place.

The first step in fulfilling your regulatory obligations is knowing your customer’s identity. For example, when a user registers a trading platform with a mobile phone number, how to verify the authenticity of the user, not a picture, a video, or a false certificate? In most non-financial scenarios, a mobile phone number or email address is sufficient for routine needs. Applications do not need to make strict and accurate correspondence between online identities and a specific person, and the Internet has worked so well since its inception.

In the crypto industry, increasingly stringent KYC compliance requirements are testing the risk control capabilities of original companies in the crypto world. We found that the old rules no longer work. User identity verification has increasingly become a thorny problem that plagues Internet applications. The game between identity fraud and anti-fraud continues. ADVANCE.AI, on the other hand, provides an excellent choice for crypto products to complete KYC.

Web2 is far more compliant than Web3, how can the encryption world learn from it?

And as the use of crypto continues to expand, traditional markets, banks and regulators do not have the tools and information to deal with transaction risks and accept the associated customers. Due to the difficulty of compliance with blockchain-related businesses, these businesses will have problems entering the mass market and traditional financial services. With the help of compliance technology service providers with a lot of Web2 compliance security experience and advanced artificial intelligence technology, quickly building a risk control security system may be a feasible way for encryption companies to become compliant.

Taking KYC as an example, whether this functional module can be done well is a test of the capabilities of these nascent Web3 companies.

Fortunately, in the Web2 world, there are well-established solutions for perceptual risk management based on digital authentication. For example, encrypted trading platforms need to use KYC to understand the real identity information of customers and then assess user credit risk. This measure is equally important in the field of financial technology; the popular wool party and brush volume transactions in the world on the chain happen to be the daily routines of global e-commerce platforms. Risk control pain points that need to be continuously faced in business…

As a leading artificial intelligence company, ADVANCE.AI seeks to help crypto enterprises solve digital identity verification and business risk management problems in one place, based on the rich global security compliance experience accumulated in the Web2 world.

Specifically, ADVANCE.AI  detects the ID quality (IQA) in real time , guides and reminds users whether there are problems such as reflections or incomplete images, and helps customers upload high-quality images to improve the effectiveness and accuracy of subsequent verification; Document Recognition (OCR) can quickly and automatically identify and extract the text in the photo within 1 second, and store it as structured data for subsequent processing and analysis; liveness detection collects dynamic images in real time through the camera, recognizes the facial expressions of people, and avoids fraudulent users. Other people’s photos or pre-recorded videos are displayed in front of the camera, deceiving the system, and significantly improving the reliability of remote online transactions; face comparison can quickly identify, extract and compare the features of face images, and calculate the similarity of face images. In order to verify the product belonging to the real user of the face image, the accuracy of the identification of the document and the detection of the living body can be improved.

In addition, by connecting with authoritative data sources, ADVANCE.AI provides ID Check products covering more than 200 countries or regions around the world, identifying ID cards, driver’s licenses, passports and other documents, and the calling price is only 30% of the quotations of other suppliers- At the same time, ADVANCE.AI has local support teams in many places in Southeast Asia, and flexibly uses a variety of instant communication software, which can respond to and solve product operation pain points and customized needs within 15 minutes, saving more than 50% for Web3 enterprises. Control costs and improve business operation efficiency by more than 80%.

In today’s bear market environment, ADVANCE.AI can effectively help Web3 organizations save compliance costs and improve business risk control and security efficiency.

Although it has not been a long time in the game, ADVANCE.AI has already gained the trust of a group of Web3 head players. One of the top “three” trading platforms known to investors has used ADVANCE.AI’s identity verification and eKYC products in Southeast Asia.

It can be said that in the compliance process of crypto products, ADVANCE.AI, a company that focuses on financial risk control, has been ahead of the encryption world, and has built the Web2 infrastructure required for compliance for encryption companies first. . These valuable experiences accumulated in the traditional industry of Web2 allow ADVANCE.AI’s leading KYC and AML solutions to help encrypted products and institutions to go on the road to compliance more easily.

In September 2021, Advance Intelligence Group, where ADVANCE.AI is located, completed a US$400 million Series D financing, led by SoftBank Vision Fund Phase II and Warburg Pincus, with a valuation of over US$2 billion. The core team of ADVANCE.AI graduated from first-class universities such as Stanford, Tsinghua University, Fudan University, National University of Singapore, etc., and has diversified experience in technology finance including Amazon, Tencent, Goldman Sachs, etc.

ADVANCE.AI can help encrypted enterprises learn from the experience of Web2 to complete some of the processes necessary for compliance, build a complete compliance supervision system, and help the entire blockchain and cryptocurrency ecosystem better integrate into the traditional economy and be widely used by more Financial market acceptance. ADVANCE.AI wants to create a bridge that adapts to new business models and adopts blockchain and crypto in a secure and compliant way, and aims to create a global standard for the entire industry.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-09-01 11:39
Next 2022-09-01 11:41

Related articles