Cryptocurrency or virtual currency is gaining limelight from the last few years. People are seen taking a keen interest in this new technology. But not to forget cybercriminals have stolen around 1million bitcoins from different exchanges. It has significantly influenced the cybercriminals to keep executing their activities without the fear of getting caught. Cryptocurrency has become a secure and trusted form of money but there is still a high risk of scams in these sectors. By deploying digital identity verification solutions for KYC and AML checks play a great role in mitigating the risk of fraud.
Cryptocurrency Business & Related Scams:
Cryptocurrency needs to be abiding by the laws regarding KYC and AML as per regulatory authorities to fight back digital scams:
Empowering the Terrorists
Terrorists find the cryptocurrency the safest means of raising funds for their criminal activities without the intervention of any agency or fear of being caught. $5.2 billion were reported to be laundered in the year 2018 in Europe. So AML compliance plays a vital role in this sector.
AML Compliance and Cryptocurrency:
Cryptocurrency is a center of attention for money launderers. Crypto scams can be prevented by using digital AML solutions.
The organizations lacking proper channels for authentication end up paying hefty fines for negligence as per strict regulations. AML checks can be used to authenticate users in order to gauge the legitimacy of cryptos. To meet the GDPR compliance there is a dire need for real-time AML measures for cryptocurrency. Using cryptocurrency platforms for their scams is becoming a haven for criminals as it does not require any identification authentication.
Fake ICOs:
Initial Coin Offerings(ICOs) mostly face and dumped right after they have attracted enough investments. This is the most occurring fraud that do not offer any kind of utility but a lot of promises come along.
Phone Porting:
In this type of scams, the scammer steals the identity of the victim to use it to call the phone service provider and transfer the number to another provider. They log out of the victim from all his accounts. When the victim tries to reset passwords, he does not get the verification codes on his phone.
Online Wallets or Centralised Exchange
When cryptocurrencies are stored in an online wallet by investors, it can be an easy target for hackers. This treasure can be hacked quiet sophisticatedly. Cryptocurrency exchanges are always vulnerable to such lethal attacks.
Dark Exchanges:
Plenty of shady exchanges are rooting so the question arises which cryptocurrency exchange to trust? A large number of cryptocurrency exchanges do not even uphold KYC and AML compliance. They may put up an online presence to look credible on the surface only to steal money from investors.
Digital Identity Verification-Solving the Equation for Scams:
Cryptocurrency has a great market potential but crypto platforms should be regulated properly by the government agencies. To hinder the cybercriminals and money launderers KYC and AML checks are needed. But currently, the organizations have failed to comply with anti-money laundering laws and regulations so proving to be a bliss for criminals. This has drastically affected its market value. In the case of law infringement, the cryptos will have to face the strict legal penalties
Effect of KYC and AML on Cryptocurrency:
The crypto world will be a much better place with secure transactions. KYC and AML checks will limit the number of frauds to prevent huge losses and hefty fines. Only if the identity of investors for ICOs and users at the cryptocurrency exchange is properly verified using good channels the frauds can be mitigated. For KYC complete information must be exchanged and verified thoroughly against their original documents using digital document verification solutions.