Verifying Customers at the Speed of Crypto Requires AML/KYC Reset

Being able to identify your customers accurately and quickly is no longer something cryptocurrency companies can afford to ignore.

Increasingly, having a strong know your customer (KYC) and anti-money laundering (AML) process “is table stakes to be in the industry, and to be a reputable player,” said Steve Munford, CEO of identity verification company Trulioo.

“We are seeing an increase in regulation on crypto, and I think it’s just a natural evolution as crypto gets more prevalent everywhere,” he told PYMNTS’ Karen Webster in an interview. “The regulators, like in any other space, will follow.”

However, it can seem more daunting in the cryptocurrency industry, as the foundational blockchain technology was designed to keep transactions strictly peer-to-peer (P2P), and as anonymous as possible.

“Inherently, crypto was meant to be less transparent than other transactions,” Munford said. “I think the platforms where you can open an account and trade and exchange [cryptocurrencies] are making every effort — or the leading ones are making every effort — to follow the same KYC/AML directives as other, similar financial institutions.”

Munford added that he doesn’t think anyone in the crypto space is arguing that crypto should be different.

“I think they’re just saying, ‘Give us some time to catch up,’” he said.

Going Global Faster

Munford, who has a background in security in other industries, said there are two other big differences that crypto faces in falling in line with compliance laws and regulations.

One is largely public relations (PR). For a long time, the only time anyone outside the industry heard about bitcoin and other cryptocurrencies was when they were used for illicit transactions — from the infamous drug and weapons dark web marketplace Silk Road to the recent and growing string of ransomware attacks.

However, as Munford noted, that is a tiny part of crypto. In 2020, crimes of all kinds, from fraud to ransomware to purchasing illegal goods, made up about 0.3% of all cryptocurrency transactions, according to blockchain intelligence firm Chainalysis. Of course, crypto is a $2 trillion industry, so that’s still a lot of money.

Read also: 2021 Crypto Scams Top $7.7B, Fueled by DeFi-Friendly ‘Rug Pulls’

The other is the speed at which crypto companies are going — or have gone — global.

“On average, most of our customers are doing business in 30 or 40 countries,” Munford said. “The crypto players are ahead of that. And they really want to be ubiquitous in every geographic region, in every country globally.”

So, this new industry is pushing Trulioo to expand its global footprint far faster than it had been, Munford told Webster.

“The crypto players want to be everywhere,” he said.

Many Rules, One Goal

One of the issues Trulioo is facing is that there are many differences in the rules around the world, ranging from nuances to substantial variances.

When it comes to going global, crypto companies are largely fast-moving by their very nature. The industry has no intrinsic connection to national borders, geography or cultures.

“So inherently, they have a lot more complexity in what they’re trying to do than some traditional, regulated industries,” he said.

For companies like Trulioo, Munford added, “going to industries that want to be disruptive and want to reach those consumers on a global basis — it’s a tough problem.”

But, he added, it’s a good problem to solve, as it will ultimately benefit all of Trulioo’s customers.

One of the main goals of any identity verification process is to balance compliance with friction. It’s a challenge for crypto players as they’re focused on creating a streamlined onboarding process.

“For one thing, any identity verification company doing that successfully on a global scale must have a holistic approach,” he said. “I don’t think there will ever be one way to verify or authenticate identity. We orchestrate 450 different data sources to get to the right identity on individuals, depending on their demographics and their country.”

Speaking to Webster, Munford ran through some of the many forms of ID she would have: passport, driver’s license and many others.

“You have a certain demographic that I can look to,” he said. “I can identify you because of these attributes and how long you’ve been established — you have all these different forms of ID.”

But, he added, a new immigrant to the U.S. or a student is not going to have the same level of credentialing, so there is a different set of techniques needed to verify those individuals.

The key is to bring them all together on one platform, Munford said.

At Trulioo, he added, “we have this belief that if we’re successful, all of a sudden billions of people will be able to participate in the global economy, whether that’s providing services, buying goods or selling goods digitally,” Munford said. “And I think that’s pretty powerful.”