What KYC and AML are for | Blog RevenueBot.io

Everything you do with cash and e-money involves data verification. Its purpose is to prevent people from losing money and for the state to monitor the turnover of funds within the country. Hence the two main acronyms, AML and KYC, have been around for almost 20 years.

What exactly it is

AML stands for Anti Money Laundering and KYC means Know Your Customer.

The former is a policy designed to combat money laundering. In this case, it is a certain set of procedures observed by legal entities to counteract illicit financial activity. AML includes identity verification (KYC), storing and sharing of user data between organizations and agencies.

Banks, exchanges, and investment funds audit businesses if they notice mostly cash operations, holding money at different banks, investing through brokers, and buying cash settlement tools.

KYC is a way of doing business that tracks the identity of the customer through the gathering of information. You are asked for passport data when you take a loan from a bank, make a deposit, when you just get a card, or if you set limits on transfers – all these are KYC.

Through KYC, the bank or exchange reveals the details of its customers, authenticates the user (his/her passport data, property info), traces transactions, compares data on the volume and nature of transfers, on counterparties or material assets of the client. KYC is a particular example of AML policy, so the terms are not equivalent.

Why KYC and AML are necessary

Banks use KYC and AML policies whenever they grant you a loan and require your passport or phone number. When opening an account, it is mandatory to provide passport data and submit it at the reception desk or take a video to verify it. Stock exchanges and pawnshops have similar requirements. Depositors do not suffer losses, while governments fight against illegal money flows.

When it comes to blockchain, thanks to KYC and AML policies, customers are able to make quick currency withdrawals into real money, keep cryptocurrencies legal and transactions secure. Any user is aware that their token has not previously been used in unlawful procedures.

KYC and AML are not a violation of a user’s anonymity, but a guarantee of secured transactions. The customer can be sure that:

trading on the platform is safe;
they are immune to fraud;
they top up the balance right away without a extra charge;
it would be no problem to restore the account in case of login loss.

According to AML policy, the exchange reviews each user’s transaction history, something that cannot be forged. This is how the exchange protects itself from illicit activities and provides transparency of transactions. AML policy includes monitoring and risk assessment of transactions, testing cryptocurrency validity.

You will encounter KYC and AML requirements in crypto exchanges if you create a personal account. To encourage users to share their data more eagerly, the owners of the platform impose restrictions on the maximum time for withdrawal, as well as the maximum amount of funds to be deposited or withdrawn.

Why KYC and AML are necessary

KYC and AML are not a violation of a user’s anonymity, but a guarantee of secured transactions. The customer can be sure that:

trading on the platform is safe;
they are immune to fraud;
they top up the balance right away without a extra charge;
it would be no problem to restore the account in case of login loss.

The way KYC and AML work in Russia

In Russia, KYC requirements are fulfilled by the Federal Law № 115-FZ “On Countermeasures to Combat Legalization (Laundering) of Illegally Obtained Proceeds and Financing of Terrorism” of August 7, 2001 and the Rosfinmonitoring.

The KYC and AML strictness patterns are determined by the individual exchanges or banks. To obtain a credit card with a maximum limit of 50 thousand rubles, most banks will only need to enter your passport data, though some banks require you to come to the office. It is not customary for banks to call the AML and KYC procedures as they are, rather they will just have it written.

Most crypto platforms requesting verification accept Russian passports. Some platforms prefer to do without any verification at all.

Conclusion

Nowadays, KYC and AML is a must for safer handling of finances in various platforms or exchanges. As a result, it will soon become a trivial thing to undergo the verification procedure.

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