Scam Bait: ‘Anti Money Laundering’ and ‘Know Your Customer’ Practices

It is a well understood fact that a naive and uniformed deal in crypto means being lured into a loss or even a bankruptcy trap. Although crypto currency as a market is not the culprit, the short term plunder con schemes are.

However, in light of the recent hacking breakouts, it is best to analyze the existing networks of crypto that form the market fabric in order to be able to sift the scam and scum over the cream of the crypto ecosystem. While it is virtually not possible to rule out all faulty or scam projects, here’s a shockingly not so innocent category that is draining investors money; something well informed investors should be familiar with.

The inception of  KYC and AML

Much like other institutes in banking and finance, companies are required to pass on any “suspicious activity” to the authorities and block financial access to undesirables. While decentralized exchanges are free from such regulations and crypto is a border-less industry, this still qualifies as a major funds leakage in the virtual currency ecosystem.

Know-your-customer (KYC) and Anti-money-laundering (AML) practices are a startup requirement for new tech companies and startups who wish to venture into the crypto world. These market regulations were created by Financial Intelligence Unit to lower illegal and black money transactions and fraud risks by the beneficiaries. But hit and run projects find a unique way to get their share of loot. While the long sighted, in-for-real-business projects find ways to further expand their revenues. Sometimes they do so by these very policies that are propagated in the name of service standards and global interest.

These practices cost the ecosystem many more billions than all initial coin offering (ICO) scams put together. And yet, people are rarely talking about these. Mostly because they seem like due diligence and an administrative expense. In reality, they really are just process formalities that generate extra revenue for the exchange houses, a huge chunk of these sums is wasted on the actual surveillance and trail verification processes. While generating some of the most pervasive, global surveillance intel, it pins down a system that keeps billions in poverty, kills innovation and provides an excuse for the banking system to lock out the competition.

How this is problematic

KYC and AML are weak remedies, to an untameable problem. While customer rarely look into how the signup fee or transaction fee in any exchange is segmented, the breakdown tells that the single dominant expenditure that it funds is due diligence. The expense is only incurred to help satisfy financial intelligence firms in an effort to reduce money laundering and world security threats. However, in terms of effectiveness this really doesn’t help. So while the crypto world faces threats of scams and external hackers the internal antibody of KYC and AML in each cyrpto network is draining more money than any of those outsider threats.

Furthermore, entire countries have fallen victim to prejudice and a lazy risk aversion on the part of the banks. This attitude and a system of structural choosing has penetrated into the virtual money world too. Millions remain unbanked. Crypto could make multiplied amounts by catering them, rather the lot is busy, calling them the illegal or dark economy. Many small countries in the Caribbean, the Pacific and Africa are almost entirely locked out of the global payments system neglecting whatever amount of remittances they wish to send back merely out of cultural displeasement and prejudice.

Why this will remain a lost cause?

Like the war on drugs, these regulations have more symbolic value as opposed to any intrinsic value at all. Little or no success, but a whole lotta’ downside. While the great part about cryptocurrency was how enabling its potential is for globalization; this really holds its promises back, keeping many untapped and the rest dried out.

The absence of financial infrastructure is a void that can easily be filled with Fintech solutions. Which makes a gigantic industry that serves as a paramount backbone to online transactions and the future of finance slash the future of global economies. But, these regulations have failed in innovation, value addition and resource optimization in the name of so-called funds safety and knowing where the money has been.

Khunsha Javed

A Filmmaker, PR enthusiast & Editor of BlockPublisher-Unfiltered. I like things that make my brain tingle. Email: khunsha@blockpublisher.com or editor.unfiltered@blockpublisher.com

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