Many of the major cryptocurrency exchanges have announced that a massive influx of new traders in late 2017 caused them to be overwhelmed, leading to degraded services or forcing them to close their doors to new clients. Much of the problem was the need to ensure compliance with complex KYC/AML regulations, which the companies struggled to do at scale. This has led them to outsource the process for specialized automated compliance firms to handle.
Know Your Customer
Automated regulatory compliance companies are reporting that the rapid growth in the number of cryptocurrency exchange users and ICO investors has created a boom of new business for them.
From the start of 2017 to the end of Q4 there was a ten-fold increase in checks for crypto-related clients, Eamon Jubbawy, the cofounder and COO of document verification business Onfido, told Business Insider. “It’s not insignificant. A 10X uptick in any industry you’re serving is going to show. It’s definitely helped our growth recently but we work with such a wide variety of people.”
Jubbawy said that his company, which offers services to Bitstamp, is now vetting “millions” of IDs for clients from 214 countries. “Asia is massive, obviously Europe and the US as you’d expect but also places like India as well are big,” he said. “It’s a global phenomenon.”
No North Korean Drug Dealers
Similar to banks, brokers and other traditional financial companies cryptocurrency businesses find that they must weed out potential clients that can put them at risk of running foul of AML laws or international sanctions laws. Charles Delingpole, the CEO and founder of anti-money laundering checking service Complyadvantage, said: “We’ve had a definite uptick in companies using us for crypto-related activities. No company wants to deal with North Korean drug traffickers, right?” he explained. “No company wants to have a supplier who’s linked to corrupt Venezuelan politicians exporting cash.”
Jubbawy added: “The guys who are coming to us are saying hey, we want to make sure the people who are investing are legitimate people rather than people who are looking to move around dirty money, can you verify they’re not on any terrorist watch lists or anything like that? We love the fact we can inject a bit of trust and security into an industry that is otherwise set up for potential criminal activity.”