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Cryptocurrency Trading Apps Turn to Video KYC for Secure Onboarding

In the rapidly evolving world of cryptocurrency trading, financial institutions are adopting advanced Know Your Customer (KYC) procedures to ensure secure and compliant onboarding processes. A recent trend in the industry is the integration of video KYC (video identification), leveraging biometrics through online and mobile channels to adapt to customer preferences.

The Anti-Money Laundering Directive

The anti-money laundering directive, AMLD4, entered into force in Europe in June 2017, with stricter Customer Due Diligence (CDD) requirements aimed at minimizing risk and controlling customer identity. The fifth AML directive, effective since January 2020, has brought new challenges for financial institutions to improve understanding of customers, beneficial owners, and their financial dealings.

KYC Process Flow

To comply with international regulations against money laundering and terrorist financing, reinforced Know Your Customer procedures must be implemented in the first stage of any business relationship when enrolling a new customer. Banks typically frame their KYC policies incorporating four key elements:

  • Customer Policy
  • Customer Identification Procedures
  • Risk Assessment and Management
  • Ongoing Monitoring and Record-keeping

Financial Institutions Embracing Digital ID Verification

Financial institutions are now embracing digital ID verification processes, which enable automatic capture of customer demographic data and integration into enterprise systems like CRM to streamline the onboarding process, conduct further due diligence, and review for PEPs (Politically Exposed Persons).

Innovative Approaches Welcome

The use of biometrics can be challenged by local or regional regulations (GDPR in the EU, CCPA in California). However, innovative approaches are welcome, such as facial biometrics that automatically identify and verify a person from a digital image or video source.

Gemalto’s Advanced ID Verification System

Gemalto, a leading provider of ID verification solutions, offers an advanced ID verification system that helps banks comply with CDD and KYC obligations. The system provides instant auto-fill in enterprise data systems, multichannel identity document verification, customer authentication using biometric technologies, and risk assessment through the review of PEPs, sanctions or watchlists.

The Future of KYC in Cryptocurrency Trading

As cryptocurrency trading apps continue to evolve, it is essential for financial institutions to adopt advanced KYC procedures to ensure secure and compliant onboarding processes. Video KYC and biometrics are expected to play a crucial role in the industry’s future, enabling seamless identification and verification while minimizing fraud risk.

Additional Resources

  • FATF recommendations (as amended February 2023)
  • The Anti-Money Laundering Act of 2020 (FinCEN June 2021)
  • Sanctions and Anti-Money Laundering Act 2018 (UK)
  • KYC and eKYC in India: What is KYC as per RBI?
  • RBI Allows Video-based KYC yet (Money Life India January 2021)

For more information on Gemalto’s ID verification solutions, please visit [insert link].