All you need to know about KYC!

Please don’t launder your money here!

3 min readSep 2, 2018

“KYC” is a buzzword in everyone’s mouth right now. As the CEO of the decentralized crypto exchange KyberNetwork stated in a Forbes article that KYC processes will help to build more assurance, better acceptence and wider adoption of cryptocurrencies.

But why is it important to “know your customer”? And what has money laundering to do with it?

What is KYC?

The abbreviation KYC stands for “Know Your Customer” and describes a process which requires companies to ascertain the relevant information from their customers in order to be allowed to do business with them. The company has to gather the information about the client to verify the client’s identity.

So why do we need KYC now?

The KYC process is extremely important for financial institutions and other regulated companies, such as crypto exchanges and blockchain companies. Not only because it is demanded by legal authorities but also because it helps to prevent vigilantes from using platforms and use cases to launder money.

Anti-money laundering (AML) laws target illegal and prohibited activities that include tax evasion, trade of illegal goods, corruption, offer of illegal service etc. The money earned from these mentioned illegal activities has to be cleaned to use it without making someone suspicious.

The KYC process helps financial institutions and other regulated companies to detect such activities and report them to local jurisdiction.

The FATF (Financial Action Task Force) was formed in 1989 to set up laws and regulations in order to protect the financial market and uphold a legally and stable market. If these Anti-money laundering regulations wouldn’t exist, the inflation could paralyze an economy.

Who has to enforce KYC?

Every company is responsible to implement the required and proper KYC process according to the state’s laws and regulations. This means that the user verification can be different in certain countries.

HEROs KYC process!

What about AML in Austria?

In Austria money laundering and terrorist financing are prohibited by the Austrian Criminal Code (StGB) and therefore every client must identify themselves. If there are any possible violations the company must report this to the Austrian Federal Ministry of Interior.

The EU directives have to be transposed in national law. For example the Austrian Banking Act (BWG) and the Stock Exchange Act (BörseG) contain EU directives. The 4th EU directive is concentrated in the Financial Markets AML Act (FM-GwG).

More information on Austria and the EU (english): https://english.bmf.gv.at/financial-sector/Money-Laundering-and-Terrorist-Financing.html

More information about the FM-GwG (german): https://www.ris.bka.gv.at/GeltendeFassung.wxe?Abfrage=Bundesnormen&Gesetzesnummer=20009769

How does HERO implement the KYC process?

Our company first came in contact with KYC in the early days of the ICO preparations (July, August & September 2017), because HERO needed a KYC process for the ICO investors. Due to the fact that HERO held the first ICO ever in Austria there was a lot work involved. We have also installed a KYC for all bounty claiming. You can read more about it here >>

Now about eleven months later we are almost live with our first use case for HEROcoin herosphere.gg, we need to implement a KYC process again for this first use case and its users.

So far herosphere.gg was free-to-play but once HEROcoin is integrated a whole new chapter starts.

This means that every herosphere.gg user has to go through our KYC process which will include the following information:

surname and last name
residential address
photo of government issued ID (incl. date of birth, full name, etc…)

In the upcoming weeks we are going to show you how we implement the KYC process for our first use case herosphere.gg on the blockchain with a detailed step-by-step description.