Crypto KYC 2024 Regulations Update

During 2023, many regulatory bodies have taken note of the rapidly growing virtual asset industry and have realised the potential impact that this industry has on the already established markets and industries around the world. We have seen rapid growth and development of regulatory requirements and measures that virtual asset service providers (VASPS) will have to follow and implement in their everyday operations.

With Crypto sky-rocketing to new heights, and starting our year off with a bang, we can expect the regulatory bodies to implement more stringent regulatory requirements to combat the potential avenue virtual assets create for money laundering and terror financing.

What is money laundering?

Money laundering is the act of concealing the origin of illegally obtained funds and sending them through various bank accounts or legitimate businesses in an attempt to legitimise those funds for the criminal’s use.

Unfortunately due to the massive rise in the popularity of virtual assets and the lack of proper regulatory guidelines, money laundering and other scams were highly prevalent in the virtual asset space. We have seen a massive uptake of Know your Customer (KYC) by virtual asset service providers (VASPS) as a combat method against money laundering and scams in their industry.

All of these scams can be combated by virtual asset service providers (VASPS) conducting Know your Customer (KYC) to verify the identity of who is receiving the funds and who was the person who sent them.

2024 updates to KYC and regulations

In 2024 Virtual asset service providers have been labelled as accountable institutions and now have to follow the same regulations as other FSPs, which means that they are now required to report to the same regulatory bodies as your bank.

In addition to reporting to the same regulatory bodies as other FSPs, Virtual asset service providers will have to apply for an FSP licence under the newly created crypto category created by the Financial Sector Conduct Authority (FSCA) as they will not be able to conduct business without a valid licence.

In addition to the requirements from regulators, there are still suggested additional steps that are being developed to further mitigate any fraud as well as money laundering attempts. These are methods such as the Travel Rule.

Challenges of KYC

The challenges of KYC have become prevalent in the mass uptake of these steps across many FSPs due to updated regulatory requirements.

Some of these challenges include:

  • Costly verifications
  • Low Accuracy Rates
  • Lengthy verification times

Unfortunately, the costs of verifying clients’ documents are large due to most companies having to manually review submitted documents from clients which also causes lengthy onboarding times for new clients which lowers client’s conversion and retention rates.

Due to the manual review process, there is a lot of room for human error and potentially fraudulent documents slipping through. This poses a risk to companies as they are liable to ensure that they do not allow fraudulent documents or individuals to trade on the company’s platform.

Glorep aims to solve these issues by lowering the cost of verifying an individual client drastically as well as accurately assessing and verifying the submitted documents of clients. Glorep is able to reduce the verification time to only a few minutes in order to collect and verify all of your client’s details whilst simultaneously screening them amongst our multitude of sanction lists to ensure that your company remains fully compliant.

Real-life consequences of being exposed without proper procedures

According to the following article from dailymaverick.co.za: https://www.dailymaverick.co.za/article/2024-02-28-fsca-fines-ashburton-fund-managers-16m/

In November 2022 Ashburton Fund managers had an administrative sanction imposed on them amounting to a total of R16 million due to them failing to comply with all the regulations stipulated in the Financial Intelligence Centre Act.

During a routine inspection performed by the Financial Sector Conduct Authority (FSCA) the following shortcomings were discovered due to a lack of proper procedures being in place.

Whilst Ashburton Fund managers had developed and put an RMCP in place, the following critical points were left out.

  • Examining complex or unusually large transactions and unusual patterns of transactions;
  • Performing customer due diligence when, during the course of a business relationship Ashburton suspects that a transaction of activity is suspicious or unusual;
  • Terminating existing business relationships;
  • Enabling Ashburton to determine when a transaction or activity is reportable to the FIC; and
  • Implementation of the risk management and compliance programme.

During the inspection, it was also discovered that clients were not properly screened against the Targeted Financial Sanctions lists.

The FSCA stated the following warning to the media:

“The sanction imposed serves as a strong reminder that non-compliance with the FIC Act will not be tolerated. All accountable institutions are urged to continue reviewing and strengthening their anti-money laundering and terrorist financing risk and control environments. Failure to do so will result in firm regulatory action,”

Related Posts

Consequences of Someone Stealing your Data

In this day and age we have become numb with the speed and ease of online signups and freely hand out our information and documents to register with a platform or game as soon as possible without pausing and giving thought to the consequences of this information falling into the wrong person’s hands.

Comparing todays Bot prevention Technologies

On the internet, bots are self-governing programmes. The ability to create phoney accounts, access accounts that already exist using credentials that have been stolen, post comments on social media,in the person of a real person, and much more,all at frighteningly fast speeds and scale has made them a genuine threat in the hands of fraudsters.