AML/CFT for crypto service providers

With the exponential growth in the usage of digital payments such as contactless payments, more and more Fintech companies are entering the market to streamline and accelerate financial services. AML/KYC checks are now essential to prohibit any illegal source of income and to uphold the reputation of the company.

Challenges faced in AML/KYC:

Onboarding Stage

1. Lack of skilled personnel: AML professionals may be too costly to onboard or the company may lack the resources and expertise.
   
2. Assigning risk level of customers at onboarding stage: Requires reliable data on transactions undertaken by the customers and consistently changes risk levels accordingly to prevent any forms of false positives.
   
3. Identifying beneficial ownership: Complexity of data collection and legal structures of various jurisdictions with a lack of standardized documentations across countries.
   
   Ongoing Stage
   
4. Increased complexity of control: A challenge is posed to manage cross-border and multi- jurisdictional AML-compliance requirements and ever-growing customer due diligence
   requirements.
   
5. Complicated processes and technology: A need to compile and consolidate KYC data and systems and to detect any source of suspicious activities.
   
6. New ways of money laundering: Firms need to be prepared and be ready against new methods of laundering illicit funds.
   
7. Existing low AML risk clients may not remain to be at low risk. Requires consistent check through transactional monitoring to identify any suspicious trading activities.
   

Moving forward:
These would be possible and feasible solutions that shall be adopted to mitigate the challenges posted by AML/KYC.

1. To outsource to other service provider companies to onboard temporary AML professionals to conduct the services.
   
2. Searches can be improved with technology such as AI to weed out false positives and the ability to look at broader and a better scope of details.
   
3. Ensure consistency of the data by standardizing them in order to enable a more centralized analysis of potential frauds or financial crimes.
   
4. Consistently change protocols or detective measures to adapt to these ever-growing ways to money laundering. Stakeholders to discuss the potential ways for money laundering to ensure alignment of goals within the company.