Regulations on Crypto Companies and Its Importance

Which crypto companies are regulated and why it’s important to be compliant

Initially, certain regulations were drawn up with the objective to regulate and maintain certain crypto companies around the world. However, companies are now evolving their regulations and targeting the entire crypto industry as a whole with it. 

Since crypto companies pose a greater risk of anonymity, for security purposes it is necessary for these companies to comply with these regulations. 

VASPs issues certain regulations that are supposed to protect one’s assets from terrorist activities, moneylaundering, and other financial activities. Here are some of the measures that are implemented:

  • Internal AML policies are created and followed for better management and protection
  • Regular risk assessment drills are run to catch any looming threat at its early stages
  • Customer Due Diligence (CDD) is conducted at a regular interval, including KYC. all ongoing transactions and processes are monitored. 
  • All sanctions must be screened at a regular interval 
  • Any suspicious or irregular activity must be reported and recorded. 
  • A compliance officer must be appointed to review all the activities undertaken by the company at a regular interval
  • All personnels associated with the company must be educated with the policies. 

Importance of FATF compliance 

Crypto companies often become a cesspool of criminal activities because of the anonymity it provides. Therefore, it is important for the companies to comply with FATF regulations and to impose security on the transaction activities. Failing to meet these requirements might result in regulatory sanctions like monetary fines, and even jail time.   

Simply maintaining these regulations will allow the crypto companies to do the following:

  • To keep a tight check on threats of terrorist activities in and around the company. It will help them prevent money laundering or finance terrorism from the get go. 
  • They can easily escape sanctions that apply for non-compliance
  • It will allow them to detect early signs of suspicious activities from the very beginning
  • It will allow them to provide easy cooperation to the law enforcement. 

In different countries, regulatory sanctions apply under different terms and conditions. For a crypto company it is important to maintain complicity with these regulations in such a way that it does not alienate its clients. 

  • Verification flow must be regulated: Verification process for your clients is bound to be a lengthy process. However, regulating your client’s country and document types into categories will help automate the verification process. Cutting short the waiting period will keep your clients loyal and eliminate competition from other companies. 
  • Verification processes for different clients should be designed differently- The on-boarding process must be tailored in a specific way to accommodate the needs of all clients. It should have complex features for the high-risk clients while should be simpler for the low risk ones. 
  • Division of the verification levels with services- Dividing up the verification level with specific services will allow your clients to access basic services with few verifications. As they move on to more complex services, further verification levels can be applied to it. 

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