With the rising interest from regulators towards ICOs, it is becoming more difficult to conduct an ICO and meet all administrative requirements, which creates doubt for investors. KYC and AML are methods that are broadly known in the financial sector and help to facilitate relationships with regulators.
What is KYC?
Know your customer, or KYC for short is a term of banking and exchange regulation for financial institutions and bookmakers, as well as other companies working with private money, meaning that they must identify and establish the identity of the counterparty before conducting a financial transaction. This requirement involves obtaining reasonably complete information about counterparties-legal entities, the nature of their business and certain business operations. KYC is undertaken to prevent money laundering, financing of terrorism and tax evasion.
What is AML?
AML or anti-money laundering is needed to meet counter-terrorism financing and money laundering regulations. ICOs are often accused of being a viable money laundering instrument because they allow swapping cryptocurrency, that might have been previously obtained with illegal activity for freshly issued tokens that potentially can be safely exchanged for fiat in the future. AML is a vital component of an ICO that helps comply with the regulators. AML may require investors to provide personal information for an ICO company to conduct due-diligence.