Compliance with KYC and AML standards for crypto exchanges. Instruction 2020


  • What crypto exchanges need to know about KYC and AML

  • What requirements does FATF put forward to cryptocurrency companies

  • Compliance, security monitoring and other requirements to be met

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The beginning of 2020 has become quite stressful for most cryptocurrency exchanges. On January 10, the Fifth Anti-Money Laundering Directive (5AMLD) entered into force. Some platforms have closed, while others have directed all their efforts to comply with the new rules of the game. In this article, we will tell you what criteria exchanges need to meet today in order to be considered white players in the market..

Today, many major market players are registered in the UK, since the legislative framework of this state is absolutely transparent, with superbly developed regulatory instruments. In addition, the UK was one of the first countries to implement cryptocurrency legislation. Therefore, historically, exchanges that have been operating on the market for a long time are registered in the UK.. 

You should also pay attention to such top jurisdictions as: Malta, USA, Switzerland and the Netherlands. The legislative frameworks of these countries are considered to be the most advanced in the development of taxation and regulation of cryptocurrencies. 

Implementation of AML and KYC procedures


In January of this year, many cryptocurrency platforms introduced mandatory verification. This was not only a prerequisite for the KYC and AML policy, but also an important component for the security of the exchange as a whole. We can say with confidence that exchanges now know their client much better (KYC), and also more quickly prevent possible cases of fraud. 

So, for example, the EXMO cryptocurrency exchange in September 2019, before the introduction of mandatory verification on platforms, entered into a partnership with the CipherTrace service. The program checks whether the user’s wallets are blacklisted, whether they are related to terrorism, fraudulent activities, etc. With the help of such software, transactions are tracked and potential risks are assessed.

“Indeed, we found that a number of withdrawals were made to blacklisted wallets. Now we can prevent such transactions, track any cases of fraud, and guarantee that the money flow on the black market will be counteracted, ”said EXMO.

In addition, CipherTrace has its own gradation of cryptocurrency exchange security. So, in February 2020, EXMO was awarded the green rank. Thus, the company was recognized as a transparent and secure exchange.

However, the mere use of special programs does not give full guarantees. Of course, the main role here is played by the Compliance Team (literally – the compliance team) of the exchange, which works around the clock and conducts manual monitoring of any suspicious. 

Compliance with regional representation based on FATF recommendations


FATF is an intergovernmental body, the Financial Action Task Force on Money Laundering. It was founded in 1989 and now includes 37 countries. FATF has developed a series of recommendations on the regulation of cryptocurrencies and the activities of cryptocurrency operators.

The FATF updates the list of high-risk countries every three months. This list is determined by the strength of anti-money laundering laws in a particular country, to what extent the country cooperates in the development of anti-money laundering instruments and in the provision of data. Respectable cryptocurrency exchanges do not work with users from blacklisted countries, and thus, by default, increase security on their platforms.. 

The laws of the cryptocurrency industry, like any other, are constantly updated and constant monitoring is necessary to comply with them. Exchanges that participate in crypto alliances, as well as those working with FATF tracking and interacting with FCA claim groups, are today an example and indicator of trustworthiness. You should also remember about local legislation (country of registration). For example, if a cryptocurrency platform is registered in the UK, the proper department should be aware of the requirements of Her Majesty’s Treasury (HM Treasury).

Any trustworthy exchange that plans to stay afloat for a long time must implement all regulatory changes in the industry in a timely manner.

Compliance with KYC and AML standards for crypto exchanges. Instruction 2020

1.Tracking sanctions and PEP lists

PEP is an acronym that stands for Politically Exposed Persons, that is, politically significant persons. Exchanges cannot allow politicians to be included in the list of their clients, for this, employees must constantly monitor PEP-lists. Sanctions lists are also monitored to eliminate the risk of involvement in money laundering and terrorist financing. To keep their finger on the pulse, platforms use special software, for example – Namescan.

2. Continuous monitoring of transactions 

We are talking about CipherTrace and our 24/7 Compliance teams. The task of the Compliance Department is to identify suspicious transactions. Following the detection, as a rule, there is a blocking in order to prevent fraudulent activities on the platform. 

3. Financial security monitoring department

The presence of a financial security monitoring department on a cryptocurrency exchange is an important indicator of the platform’s reliability. Each site has an individual approach to countering fraud. Such systems must be developed and implemented on each platform. Monitoring is often similar to scoring systems in banks and allows you to check the quality of all transactions. This allows you to track and immediately block stolen funds from different exchanges.. 

4. Safe storage of data

It is no secret that the main task of the crypto exchange is to take all necessary measures to maintain strict confidentiality of any incoming data. This is recorded in the user agreement, privacy policy and GDPR requirements.. 

All information should be stored on encrypted servers and no employee should have access to it, except for a certified AML officer.

Cryptocurrency exchanges are not only responsible for the monetary assets of their clients, but they are also the responsible person in the fight against illegal money laundering. In our opinion, this mission should be taken seriously by all specialized sites. And returning to the beginning, now you understand – the AML officer of the cryptocurrency exchange really sleeps very little. 


All information contained on our website is published in good faith and objectivity, and for informational purposes only. The reader is solely responsible for any actions he takes based on the information received on our website..

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Compliance with KYC and AML standards for crypto exchanges. Instruction 2020
Compliance with KYC and AML standards for crypto exchanges. Instruction 2020
Compliance with KYC and AML standards for crypto exchanges. Instruction 2020

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Compliance with KYC and AML standards for crypto exchanges. Instruction 2020

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